Lender changed Loan terms day before closing

[Cayton Green]

Hello,

My GF is in a pretty frustrating situation with her current lender and I wanted to explain the situation to hopefully get some guidance on what she should do. 

She is currently in the process of a cash-out refinance on her condo (investment property) with her lender. Everything was going smooth at first. She signed her Closing Disclosure 3 days before closing day. Then, the DAY BEFORE closing day, the lender informs her that the condo is in fact 'non warrantable' and they can't lend on a traditional conventional loan and need to change the loan terms to a 'non warrantable' loan product which greatly increases her interest rate. They waited till the last minute to get an HOA questionaire which on the day before closing caused them to change loan terms.

The original rate they agreed on and signed a closing disclosure was a 3.875% rate, and the new 'non warrantable' loan product is at a 5.5% interest rate. 

This obviously was a huge surprise to us, and we now want to explore other options with other lenders. We just got word today from her current lender that if we don't move forward with the 'non warrantable' loan, that we'd still be charged for the appraisal and the HOA questionaire.

--Can they still charge us for the appraisal and the HOA questionaire even though THEY changed the loan terms last minute? We were misled until the day before closing and never agreed on this new 'non warrantable' loan.

If in fact this sound illegal on their part, what options do we have to dispute this?

Any help is greatly appreciated! Thanks!

[Reid Chauvin]

@Cayton Green - condos can be a major pain, especially with some recent tightening of requirements for conventional lending on them. I can't speak to whether this particular lender intentionally misrepresented or just didn't know what they were doing and did a poor job at setting expectations. If this feels like true misrepresentation then you should be able to file a complaint with CFPB or the mortgage licensing agency in Austin. Regardless, if they have any credibility they should be willing to at least share the cost burden of this change of terms. 

If I were you, I'd definitely want a second opinion from another lender to see if conventional lending is truly not an option before I agreed to close. This second opinion would of course take some time, as the new lender would have to obtain their own questionnaire and appraisal. Your current lender should be willing to work with you on this as far as moving the closing date back and extending a rate lock (if necessary), in my opinion, in effort to remediate the situation.