Normally that’s the case –
lenders or loan servicers who purchase loans, must honor the terms of the original loan. I’ll be curious to learn more about this situation. I can understand a single clerical error which had a fixed-rate loan double the charged rate, and someone dragging their feet about fixing it. If it’s happened to the whole neighborhood, and they all got the same financing at about the same time, that makes me wonder if there was some hidden and/or undisclosed clause at closing which said the loans could or would adjust under certain circumstances. If that’s the case, it should have said so in the closing loan documents, which folks SHOULD have saved for their records, but which also SHOULD still be available for review from the lender itself. In that case, it was the lender’s job to point it out, but also the borrower’s job to know their own loan documents and ask if they didn’t understand that clause. If those terms were not disclosed, that lender is ripe for a class action lawsuit. Which of course the whole neighborhood would have to get together, with their various legal counsel, and file that as a collective effort. Which is very difficult to make happen, not for legal reasons but just in terms of sheer “talk to everyone and get ‘em on board”.
Sounds to me like someone with the lender looked way down the line, saw the likelihood of this oddball scenario playing out, gambled that no one would file against them, and right now they’re reaping the benefits of that bet. Decisions like that are not made at lower levels. If the above scenario is accurate, it would have been a top-level decision.
I would hope the friend in this situation is pursuing legal recourse? Easier said than done, I know, but this is NOT how loans are typically handled. The terms you sign are the terms for the life of the loan unless you refinance. A fixed rate is a fixed rate unless there was some kind of “out clause”, and it would have to be stated as such. Lenders can’t just go changing terms. If that were the case, we’d all have some sky-high APR right now.