Q I applied for a home mortgage with my credit union. When I looked at their rates, they had listed a 30-year jumbo loan for 0.054 percent with 0.5 points. I submitted forms and received a confirmation with the listed rates. However, when the loan officer contacted me, he quoted a 5.75 percent loan.
I explained that I had a confirmation for the 0.054 percent rate, but the loan officer said that there is no such loan less than 1 percent and that it was a computer glitch. I pointed out that all of their advertised jumbo loan rates were at the lower rate, while non-jumbo loans were more than 5.6 percent.
The loan officer was unwilling to give me a loan at that low rate and I opted not to take any loan. I then received a cancellation notice with the 0.054 percent stated as the interest rate.
Is there any action I can take to get that low rate or should I just chalk it up as a computer glitch?
A If you can get that rate, let me know the name of your credit union. I know a lot of people who would jump at the chance to get any loan at less than 4 or 5 percent, let alone one that is under 1 percent. To my knowledge, your lender is correct. I have never seen a commercial mortgage loan at less than 1 percent.
I know rates are still low, but you will have to admit that a 0.054 percent rate is so low that it had to be an error. And computers do not make mistakes; humans do.
To have a binding contract, three elements are necessary: an offer, acceptance of that offer, and some form of consideration. Generally, consideration is money. Taking action, or refraining from taking action, based on the offer will also be considered valuable consideration.
However, the law is clear that an advertisement is not an offer; it is an invitation to make an offer. For example, if a department store advertises television sets for $10, when the ad should have said $100, the courts will not require the store to sell the TV set for that low price.
Thus, the advertisement on which you relied will not help your case.
But you have indicated that the lender gave you a written confirmation for this low rate, and that might favorably change the situation for you. Under those circumstances, as strange and as bizarre as it may sound, you might legally argue that you have a contract with your lender for that wonderfully low rate.
A lawyer would have to carefully review the documentation. Most lender "confirmations" are not firm, binding loan commitments. The lender usually has to review your credit situation, as well as obtain a satisfactory appraisal of the property. You must be absolutely positive that you have a binding contract. After all, most judges would probably laugh you out of court if you filed suit claiming that you are entitled to an interest rate of less than 1 percent.
I really do not believe that you have a case to take to court. Unless you can prove that the low rate was a promotional marketing item, the law is not on your side.
That does not mean that you should drop the matter. Clearly, the lender made a mistake, especially when you got a written confirmation. I would go back to the lender and explain the situation. Perhaps they would be willing to compromise by giving you a rate that is slightly lower than the current market is offering.
After all, it was their error, and they should pay something for the inconvenience they caused you.
By the way, if you really want to refinance, you should consider doing it now, because it is clear that mortgage interest rates are on the rise.
Benny L. Kass is a Washington lawyer. For a free copy of the booklet "A Guide to Settlement on Your New Home," send a self-addressed stamped envelope to Benny L. Kass, Suite 1100, 1050 17th St. NW, Washington, D.C. 20036. Readers may also send questions to him at that address.