Legal Question in Real Estate Law in California

Error in published mortgage rates

A major bank recently offered me a mortgage rate of 2.25% due to a reporting error (the rate should have been 5.25%). A printed rate sheet was provided to me by the bank and the loan officer said that the bank would honor the rate. The rate sheet included the base rate (2.25%), points (0), and APR (6.515%). The base rate was incorrect but the APR was correct. A mortgage application and a rate lock for 2.25% was submitted. An e-mail was sent by the loan center to the branch loan officer stating that the bank would honor the rate. A week later, the bank recinded and said that it did not have to honor the rate because the APR was correct. Do consumer/banking laws in Calfornia allow this? (if they had said from the beginning that they would not honor the rate then I would not be upset because it was an obvious error).


Asked on 1/25/06, 4:48 am

1 Answer from Attorneys
Bryan Whipple Bryan R. R. Whipple, Attorney at Law

Re: Error in published mortgage rates

I don know of, and generally would not know of, any laws specific to the conduct of a national bank's mortgage-lending activity. However, on general contract law principles, I would say the bank cannot be held to honoring the 2.25% rate when the higher APR is also shown. General contract law excuses obvious mistakes and doesn't allow one party to get away with a "gotcha!"

Also, if pressed to do so, the bank's mathematicians could invent a loan whose terms would produce a nominal 2.25% rate and a 6.515% APR, e.g. by charging 30 or 40 points.

So, your best bet is to swallow your pride and see what kind of non-mistake-driven loan terms are available, from this lender and elsewhere.

If you suffered any actual loss, as distinguished from a prospective loss by not bagging the erroneous rate, this might be a differet story. This would be a claim based on some kind of negligence theory, not contract law.

Read more
Answered on 1/25/06, 11:24 pm


Related Questions & Answers

More Real Estate and Real Property questions and answers in California