Bad Lenders: How Do You Challenge Negligence and Abusive Fees?

This image is for illustrative purposes only and does not depict an actual borrower.

When Christine approached me about her mortgage refinance, she was two weeks away from closing and faced an unexpected rate increase paired with shockingly high closing costs. Despite her long-standing relationship with the local bank—having used them for a construction loan just a year earlier—she felt blindsided. Her quoted interest rate had jumped by a full percentage point without explanation, and she was now staring at a $14,000 closing cost on a $360,000 loan. Concerned she might not qualify elsewhere due to her credit score, she felt stuck. While I could not provide her with a loan myself (I am unlicensed in her state), I wanted to help.

As we reviewed her loan documents, several issues came to light. First, the bank never locked her rate when they initially quoted a competitive 6.5%, meaning the market shift drove her new, higher rate. Second, the bank was charging an origination fee of $8,600, or 2.38%—well above industry norms. While they claimed her low credit score and high loan-to-value ratio justified the fees, it amounted to effectively charging her twice for the same risk factor already accounted for in the interest rate.

Recognizing that excessive origination costs could be challenged, I advised Christine to meet with the Loan Officer and the Bank VP. She demanded the original 6.5% rate—arguing the bank had been negligent in not recommending a lock sooner—and requested the origination fee be reduced to $1,500 or less. Initially, I was uncertain whether the bank would negotiate, but they ultimately agreed to lower her rate by half a percent and remove the origination fee entirely to compensate for the other half percent difference.

Christine’s experience underscores an important lesson: borrowers should insist on transparent communication about rates and fees throughout the loan process. If your lender can’t or won’t answer your questions clearly, consider seeking alternatives before you’re too far into the transaction. Always remember that consistent support and responsiveness from all parties—including the lender, realtor, and title agent—should be standard, not a luxury.