Mortgage Blog

I hope everyone enojoyed the Valentine's day and the
Chinese New Year. It's a great weekend for us, with
parties and all the delicious food.

When we talk about the Valentine's day, one important
thing is the commitment, the love. We have the commitment
to our loved ones.

It's very similar to the rate locks. When the mortgage
broker lock a mortgage rate, we have the commitment to
the lender, if this loan qualifies, we will deliver to
the lender; The lender will have the commitment to the
investor, they already arrange the funds from the investor
and prepare to sell the loan if delivered. And the borrowers
have the commitment for this rate lock and prepare to
close this loan at this rate lock.

When the rate goes lower after the rate lock, the common
questions we heard are: 1)Can we float down the rate?
2)Can we submit the loan to another lender?

For either scenarios, we can not do it without cost(same
for the relationships). For the rate floating down, the
investor will allow us to do it for certain cost(
0.5 point for most lenders), so usually we float down
the rate when the rate goes down a lot)0.25% or more).
We will still keep the commitment, and the lender will
allow us to do it if possible(though at certain cost)
in this case.

If we decide to submit the loan to another lender, first
we will have some extra cost, like appraisals; second,
we(mortgage brokers) will break the commitment to the
lender and will tell them that we can not deliver the loan.
If we do it a lot of times, we will be kicked out or
will get worse rate(or pricing) for the future loans
with this lender. In the long run, it's not a good practice
and it will hurt the relationship(with the lender).

For my cleints, we will commit to the lender whenever
we lock the rate. It will be almost impossible to re-lock
the rate or float down the rate(most of the time). So We
have to have that in mind when we decide to lock the rate.

I had 3 "former" clients did not sign the loan docs in 2008
when the market rate was 0.125% better; and the rate they got
from other agents was still not the best and they did refi
again after that. We can not compete with the market. Though
I can get the best rate today, I can not gurantee it's the
best rate the 2nd day or afterwards.

So in today market, when we decide to lock the rate, we
already know that is will be very hard to float down to
get lower rate.

Enjoy the long weekend and the readings. I will work on the
monthly newletter this week(around Feb 18th).