A lender is required to refund a lock-in fee if the loan application is denied. This is because the purpose of a lock-in fee is to secure an interest rate while the borrower completes the loan application process. If the lender ultimately denies the application, it is deemed unfair to keep the fee when the borrower will not be receiving the benefit of the locked-in rate. Refund policies are designed to protect consumers from losing money due to circumstances beyond their control.
In contrast, the other situations do not trigger a refund obligation. For example, if the loan meets all requirements, the lender is fulfilling their side of the agreement, so the fee would not be refunded. Similarly, approval of a credit check does not necessitate a refund, as approval indicates progress in the lending process rather than a failure. Lastly, a borrower's request for a refund does not automatically validate the refund; it must be tied to specific conditions outlined in the lending agreement, such as loan denial.