Is it legal for a bank to change the terms of a loan AFTER the borrower has applied for that loan?

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I applied for a ten year fixed rate equity loan with a bank. I have had many loans, am educated about it and am very clear about what I am applying for. In writing during the application process the terms on the 25,000.00 loan were 4.75% over ten years with no pre-pay penalty. After three weeks the bank informed me that the application was approved. But when I looked at the terms they had changed it to a variable rate loan with a lock in for the first five years, variable after that and a pre-payment penalty if I paid it off before the ten year term. I told them I would not accept a pre-pay penalty. But would take the loan other than that. I figured I would probably pay it off before the ten year term. I asked them to send me the papers to sign. Then they changed it from a variable rate ten year loan with a lock in for the first five years to a five year balloon mortgage with a huge fee at the end of five years. On top of that they asked me to sign a waiver of all my rights to defend myself against “any actions taken by the bank” and also asked me to sign a document whose wording is basically a power of attorney giving them the right “at any time, even if there is no default” to take over the building, collect rent, enter the premises, make maintenance etc…. Can any of this be legal?


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Wow, what a mess. Slight changes in the APR is normal but those kind of major loan changes would need to come with an explanation. I would have major concerns about the waiver. My recommendation: Go find a more reliable lender that isn’t such a predatory shark. This just seems like bad business to me.

Answered 4 months ago

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