Question about making a counter offer for a loan to sell on the secondary market.....If an appraisal comes in lower than the estimated value, would we be justified in giving a counter-offer with a higher rate than what was locked in? If our investor charges 1.25% for a 67% LTV but the actual LTV comes in at 74% and the charge by the investor will be 2.75%. Can we counter offer with the higher rate and same loan amount...or must we counter offer with the lock in rate and lower loan amount?

Is a low appraisal or the inability to approve the loan for the amount applied for a condition in your lock agreement that breaks the lock? If you cannot make the loan and meet the terms applied for, yes, it is a denial which you can then normally counteroffer if you choose to do so.

No, that terminology is not in the lock agreement....yet....we only had verbiage relating to a the credit score...however, we are currently re-writing the lock agreement to also include LTV......

Since we did not have the LTV as a condition in the lock agreement.....can we still go ahead and make a counteroffer at a higher rate? My thought is yes because we do in fact have to deny the loan as is....but I would like confirmation.....

I'm not sure if you are saying we can do this, Randy. without having the language in the lock agreement....

You are bound by the legal obligation that was created when the written rate lock agreement was signed by the borrower and the creditor. You are asking questions that only your legal counsel can answer, and which can advise after reading the agreement while considering State law and other court precedents. That is not something we can do sight unseen.

Thanks for that, Randy....