Wells Fargo jacked up rate to near 9% help

[psychocandy]

What is the name of your state? WV

Hello,

I entered a construction loan agreement with Wells-Fargo back in April. The rate at the time was 6.25%.

We are finally near completion on the project and I received a call from WF today stating that our interest rate on the mortgage will be 8.75%! This is nowhere near the original estimate and there have been no fundamental reasons for the rate to be this high. My credit score has not chaged (720) and I have not been late on or defaulted on any construction loan payments.

I was told that the loan was no longer being offered (due to corrections in the morgage markets). I guess they have been burned on sub-prime loans and now are trying to evaluate their loan porfolios to determine which people to gouge to try to make up some ground. They said my loan was 100LTV which put me in a "high risk" category and therefore I will have to expect to pay this obscene rate, even though there was no mention of this when the loan was being processed.

Am I at the mercy of WF here or are there options to push back for a more competitive rate? I know that legally I do not have any rates "locked in" as I was busy with general contracting work and didn't anticipate getting screwed on the rate to this extent.

I should have considerable equity in the home when it is complete and can get an appraisal to justify this, even though there is no appraisal required by WF. I guess they stopped this practice to prevent a small minority from having to bring money to the final closing in the event that the home did not measure up to the anticipated appraised value.

BTW, I am being told by WF that there are no pre-payment penalties with this loan so my last option would be to immediately refinance. But this isn't good timing for that option as my liquidity is limited given the magnitude of the construction project.

Please advise if anyone has any constructive suggestions or advice.

 

[Zigner]

You were quoted a loan many months ago. Now, the interest rate has changed. There is nothing wrong with that. I suggest you shop around for a different loan.

 

[HomeGuru]

What is the name of your state? WV

Hello,

I entered a construction loan agreement with Wells-Fargo back in April. The rate at the time was 6.25%.

We are finally near completion on the project and I received a call from WF today stating that our interest rate on the mortgage will be 8.75%! This is nowhere near the original estimate and there have been no fundamental reasons for the rate to be this high. My credit score has not chaged (720) and I have not been late on or defaulted on any construction loan payments.

I was told that the loan was no longer being offered (due to corrections in the morgage markets). I guess they have been burned on sub-prime loans and now are trying to evaluate their loan porfolios to determine which people to gouge to try to make up some ground. They said my loan was 100LTV which put me in a "high risk" category and therefore I will have to expect to pay this obscene rate, even though there was no mention of this when the loan was being processed.

Am I at the mercy of WF here or are there options to push back for a more competitive rate? I know that legally I do not have any rates "locked in" as I was busy with general contracting work and didn't anticipate getting screwed on the rate to this extent.

I should have considerable equity in the home when it is complete and can get an appraisal to justify this, even though there is no appraisal required by WF. I guess they stopped this practice to prevent a small minority from having to bring money to the final closing in the event that the home did not measure up to the anticipated appraised value.

BTW, I am being told by WF that there are no pre-payment penalties with this loan so my last option would be to immediately refinance. But this isn't good timing for that option as my liquidity is limited given the magnitude of the construction project.

Please advise if anyone has any constructive suggestions or advice.

**A: you are just another casualty in the subprime fallout fiasco.

 

[psychocandy]

Yeah, I am familiar with what happened with the sub-prime mortgages and am not too happy to essentially be subsidizing bad lenders/borrowers utilizing poor judgement.

This may be a dificult question to answer so if anyone know the "general rule" please advise:

Being that my contruction loan is through Wells-Fargo, am I required to also close the mortgage with them or is there ever flexibility written into these contracts where you can choose a different lender upon completion of the construction phase. I would guess that most lenders would tie the two together.

Secondly, do you guys think that by escalating this within the WF organization I could reach someone who would be willing to negotiate on the rate (increase)? Going from 6.25% to almost 9% is ridiculous. It is practices like these that will continue to add instability to the financial markets instead of stimulating recovery.

 

[nextwife]

Personally, I've been involved in closing zillions of deals in which the construction (temporary) loan was financed through one lender, and the end-out loan, to permanent financing, was done through an entirely different lender. Matter of fact, until the least few years, virtually ALL new construction loans that individuals in my area obtained to build their home were provided by one lender, and the end financing, once construction was completed, by another. Two closings was the norm.

 

[Zigner]

Secondly, do you guys think that by escalating this within the WF organization I could reach someone who would be willing to negotiate on the rate (increase)? Going from 6.25% to almost 9% is ridiculous. It is practices like these that will continue to add instability to the financial markets instead of stimulating recovery.

I think that this is a problem of YOUR making. You did nothing to "lock in" your rate. How can you expect the same rate after so much time?

 

[HomeGuru]

I agree with the previous posters.

 

[psychocandy]

I think that this is a problem of YOUR making. You did nothing to "lock in" your rate. How can you expect the same rate after so much time?

Time is only one small variable in interest rate movement. Your statement is ignorant. Your basically saying that paying 2 1/2% should be expected given the 6 months that has passed (i.e "...so much time..).

If you havent heard, the Fed cut the Discount and Federal funds rate this month by 1/2 %. This isn't about fundamental reasons for paying additonal interest so that WF can stay solvent. It is their internaly policy for subsidizing their own poor lending practices and the market corrections that have taken place. My credit scores do not put me in this high risk category, but because I chose a product that they decided to eliminate they are jamming me on the rate.

If you would have read my posts entirely, you would not find me asking for any legal grounds to stand on in terms of "locking" a rate. This wasn't the intention of my post. Hindsight is 20/20 and in retrospect this would have been the easy solution. But building a home is a monumental task, especially when your general contractor has been managin the process ineffectively and has been at the job site about 5% of the time of construction. I have had to undertake many of his responsibilites to keep things on task. During this busy time I did not think to call WF to lock a rate as I didn't think that with my credit scores there would be a significant risk that they would jam me on the rate.

Thanks to those that did read it and comprehend it in it's entirety and offer helpful advise/insights. I will check the legality of the contracts to determine if I can close the mortgage with another lender.

 

[moburkes]

We comprehended it. All of the advice that you receive is free. You are not required to like it or agree with it.

 

[nextwife]

Time is only one small variable in interest rate movement. Your statement is ignorant. Your basically saying that paying 2 1/2% should be expected given the 6 months that has passed (i.e "...so much time..).

If you havent heard, the Fed cut the Discount and Federal funds rate this month by 1/2 %. This isn't about fundamental reasons for paying additonal interest so that WF can stay solvent. It is their internaly policy for subsidizing their own poor lending practices and the market corrections that have taken place. My credit scores do not put me in this high risk category, but because I chose a product that they decided to eliminate they are jamming me on the rate.

If you would have read my posts entirely, you would not find me asking for any legal grounds to stand on in terms of "locking" a rate. This wasn't the intention of my post. Hindsight is 20/20 and in retrospect this would have been the easy solution. But building a home is a monumental task, especially when your general contractor has been managin the process ineffectively and has been at the job site about 5% of the time of construction. I have had to undertake many of his responsibilites to keep things on task. During this busy time I did not think to call WF to lock a rate as I didn't think that with my credit scores there would be a significant risk that they would jam me on the rate.

Thanks to those that did read it and comprehend it in it's entirety and offer helpful advise/insights. I will check the legality of the contracts to determine if I can close the mortgage with another lender.

If you had not initially closed on a FIXED rate, it was subject to change. You are NOT required to accept their offer, shop around. Rates can and do change. I saw rates go from around 8% to 18% in just a few months back around 1979/1980. Short term rates and long term rates are derived differently.

Yes, building a house can be a monumental task. One is NOT required to build to obtain one's own home, that was your CHOICE. Your GC did a lousy job. Presumably YOU selected that GC. How much research did you do? How many homes has this GC built and what is the overall satisfaction rating?

Bottom line sounds like you overbuilt based upon where your rate had the potential to go.

 

[psychocandy]

We comprehended it. All of the advice that you receive is free. You are not required to like it or agree with it.

I didn't realize there was a member here who spoke for the entire community. What a neat feature.

 

[moburkes]

I didn't realize there was a member here who spoke for the entire community. What a neat feature.

Nope, wasn't speaking for the entire community. Was speaking for the ones that previously responded. Not so neat after all.

 

[psychocandy]

If you had not initially closed on a FIXED rate, it was subject to change. You are NOT required to accept their offer, shop around. Rates can and do change. I saw rates go from around 8% to 18% in just a few months back around 1979/1980. Short term rates and long term rates are derived differently.

Yes, building a house can be a monumental task. One is NOT required to build to obtain one's own home, that was your CHOICE. Your GC did a lousy job. Presumably YOU selected that GC. How much research did you do? How many homes has this GC built and what is the overall satisfaction rating?

Bottom line sounds like you overbuilt based upon where your rate had the potential to go.

Thanks for your kind advice. I only mentione the issues with the GC to explain why I had not locked into a rate. Choosing the GC is completely separate discussion that I do not have time to go into.

 

[Zigner]

Your statement is ignorant. Your basically saying that paying 2 1/2% should be expected given the 6 months that has passed

No, not at all. If anyone here has the comprehension problem, it's you. YOU chose not to lock in a rate...and you come here calling ME ignorant

 

[HomeGuru]

No, not at all. If anyone here has the comprehension problem, it's you. YOU chose not to lock in a rate...and you come here calling ME ignorant

**A: I agree with the posters.