March 24th, 2011 3:37 AM by Eric Fang
From 2010, I told my clients that once the rate locked, we will not float down the ratesany more.
But I need to explain this policy to you guys one more time.
This floating down policy was not designed to benefits the borrowers so that the borrowerscan get lower rates when the rate is lower.It was designed to benefit/protect the lenders.
First, it was designed to protect lender's pipeline.If for some reason, the interest rate went down 0.375% or more, the lender knows that some borrowers will change the lenders for the better rates,so in order to protect their pipeline, they willlallow the loans in the pipeline to be floated" down.But the borrowers or the agents will have to pay the average of 0.625 points to get the lower rates.
This 0.625 points are equivalent of 0.25% rates. Soif the interest is 0.375% lower, you can get 0.125%rate lower; if the interest rates 0.5% lower, you can get 0.25% lower.
Some borrowers did ask: Can we expire the current rate and re-lock the current market rate? The answeris no. The lender will only allow float down the rate(pay 0.625 points first) or take the worse case scenario(if the market rate is better than your old rate,you will get the old rate; if the market rate is higher,you will get the higher market rate). And if youlet the current rate expire, and want to lock the new rate,the lender will only allow you to lock a new rate90 days after the old rate expires.
That's why I always recommend to close the loan first oncethe rate locked. It's your commitment, though you can change.
And like I told in the previous blogs, those who cancelledmy loans before, they found that they did not get the bestrates. And no one know the best rate until the marketconfirms so.