A borrower locks at 6.5% for 60 days. Rates fall to 6.0% three weeks later and she asks to be given the lower rate. Her lock has no float-down provision. Absent a voluntary renegotiation, does the borrower have a contractual right to the lower market rate under this lock?
Correct Answer
A) No automatic right to 6.0%: the stated lock remains at 6.5% absent an agreed change
A. A market decline alone does not create a float-down right under this lock. The agreement fixes 6.5% for the stated period and contains no float-down provision. The question excludes voluntary renegotiation, so the lower market quote does not itself amend the lock. Scope and exceptions: This is about pricing under the stated lock, not an obligation to close. Application changes, expiration and lender-specific conditions may affect a real lock. Read the agreement rather than assuming a universal renegotiation policy. Source: Rate-lock definition, falling rates and lender-specific conditions — https://www.consumerfinance.gov/ask-cfpb/whats-a-lock-in-or-a-rate-lock-en-143/
Why This Is the Correct Answer
A. A market decline alone does not create a float-down right under this lock. The agreement fixes 6.5% for the stated period and contains no float-down provision. The question excludes voluntary renegotiation, so the lower market quote does not itself amend the lock. Scope and exceptions: This is about pricing under the stated lock, not an obligation to close. Application changes, expiration and lender-specific conditions may affect a real lock. Read the agreement rather than assuming a universal renegotiation policy.
Why the Other Options Are Wrong
Option B: She gets 6.0% if she pays a fee, which every lock allows on request
A paid float-down is not automatically available under every lock.
Option C: She gets 6.0%: a lock protects the borrower and never the lender
A lock can prevent a borrower from obtaining later lower rates.
Option D: The 6.5% stands, and she may not relock even if the lender agrees
It wrongly rules out a mutually agreed change.
Exam Tip
A lower market rate and a contractual right to that rate are different.
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