Extended lock fee is a "transaction" related fee. A transaction fee is a cost associated with closing the loan. If a customer is paying to extend the lock, but the lock agreement states that this fee is a nonrefundable fee, do we have to give this fee back if the customer withdraws their loan? In the event of a denial, no question, we will refund.

You are asking a contractual issue. What does your rate lock agreement say? If it says it is non-refundable, why would you ever refund it, unless they rescinded the transaction? Sounds like you need to talk to legal counsel. State law may also come into play.

Thanks for your response. We were getting advice and pushback, from another source, that this must be refunded due to commentary to 1026.19(e)(3)(iii). Bona fide charges......."to be bona fide, charges must be lawful and for services that are actually performed".

Was just looking for another opinion. I completely agree....we do not need to refund their money if they withdrawal.

for services that are actually performed".

A lock fee is to compensate the bank for the cost of breaking a rate lock with an investor for this specific loan or the matching off process or the bank positioning itself to hedge for an increase or decrease in rates prior to the loan closing.

Your "other source" must not know that much about interest rate risks.

As I indicated, it is a contractual and State law issue. On a rate lock, the service has already been performed. No different than if you collected for an appraisal before closing and the appraisal was completed before the application was withdrawn or denied.