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#2266698 - 02/22/22 07:35 PM Rate Lock with Range
Compliance NABW Offline
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If a "rate lock" has a range, such that it could be between 4% and 4.5% for instance, would that really be considered a Rate Lock for the purposes of the LE? The CFPB seems to generally think a rate lock has to settle on a particular rate. https://www.consumerfinance.gov/ask-cfpb/whats-a-lock-in-or-a-rate-lock-en-143/. That makes common sense to me too, but, on the other hand, if that is what the agreement entails, I could still see it represents a "lock" in some way.
Last edited by Compliance NABW; 02/22/22 07:36 PM.
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#2266701 - 02/22/22 07:39 PM Re: Rate Lock with Range Compliance NABW
rlcarey Online
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rlcarey
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I suggest that you visit with your legal counsel. I have never seen a rate lock with a range. Sounds like a great UDAAP candidate. How is the final rate determined and what is a consumer paying for this honor?
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#2266703 - 02/22/22 07:51 PM Re: Rate Lock with Range Compliance NABW
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The final rate is based on the movement of the rate to closing with a cap. So, if the actual rate goes up to 5%, then the final rate would be 4.5%. However, if the rate moved to 4.375%, then because it is still in the range, it would be 4.375% at closing.
Last edited by Compliance NABW; 02/22/22 07:53 PM.
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#2266705 - 02/22/22 08:00 PM Re: Rate Lock with Range Compliance NABW
rlcarey Online
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rlcarey
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Galveston, TX
When you say: if the actual rate goes up to - what is that based on? An external index? If so, then it is going to come down to State law. I am aware of some States that would not allow a range.
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#2266708 - 02/22/22 08:39 PM Re: Rate Lock with Range rlcarey
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Not sure if an index or "market pricing." Assuming State law may allow it, would you mark that the rate is locked on the LE?

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#2266710 - 02/22/22 08:46 PM Re: Rate Lock with Range Compliance NABW
rlcarey Online
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rlcarey
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Personally, I do not think so. Giving them a range does not equate to "at a given rate" to me.

And if it is "Market Pricing" - who's market? I could make up anything I wanted.

37(a)(13) Rate lock.
1. Interest rate. For purposes of § 1026.37(a)(13), the interest rate is locked for a specific period of time if the creditor has agreed to extend credit to the consumer at a given rate, subject to contingencies that are described in any rate lock agreement between the creditor and consumer.

If you go back to the regulation, it directly refers to the interest rate disclosed under (b)(2).

(13) Rate lock. A statement of whether the interest rate disclosed pursuant to paragraph (b)(2) of this section is locked for a specific period of time, labeled “Rate Lock.”
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#2266718 - 02/22/22 09:34 PM Re: Rate Lock with Range rlcarey
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Originally Posted by rlcarey
Personally, I do not think so. Giving them a range does not equate to "at a given rate" to me.

And if it is "Market Pricing" - who's market? I could make up anything I wanted.

37(a)(13) Rate lock.
1. Interest rate. For purposes of § 1026.37(a)(13), the interest rate is locked for a specific period of time if the creditor has agreed to extend credit to the consumer at a given rate, subject to contingencies that are described in any rate lock agreement between the creditor and consumer.

If you go back to the regulation, it directly refers to the interest rate disclosed under (b)(2).

(13) Rate lock. A statement of whether the interest rate disclosed pursuant to paragraph (b)(2) of this section is locked for a specific period of time, labeled “Rate Lock.”

Thank you. That was my conclusion as well.

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#2266719 - 02/22/22 09:35 PM Re: Rate Lock with Range Compliance NABW
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The part that gave me pause though was "subject to contingencies," but with other CFPB issuances it seems pretty clear it is supposed to be a specific rate that is locked.

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#2266722 - 02/22/22 09:42 PM Re: Rate Lock with Range Compliance NABW
Dan Persfull Offline
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Dan Persfull
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"subject to contingencies,"

Generally those refer to no material changes in the borrower's credit worthiness or other underwriting conditions that would have a negative effect causing them no longer qualify for the rate.
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