Mortgage rate changed 24hrs before closing?

I had what I thought was a locked-in mortgage rate at 4.625, and the loan officer informed me the day before closing that the rate would be 5% because of some new regulation that he had just found out about two days ago. I have a “good faith estimate” with a quote of 4.625 on paper, but now pressed to close with the property manager threatening to keep a $ 3k deposit if I don’t close, I’m lost for words. Any recommendations?

This is not a jumbo loan, and I talked to a mortgage guy who quoted me at 5.5 – 5.75%. Just not sure if it’ll go down more.

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