MortgagesUndressed

Who do you think is gambling with your rate lock?

First of all you are. Of course you are. Did you lock with loan officer Dave at the time of your application? How about when you made the appointment? You could have locked over the phone. But you waited. So there is the proof. You gambled with your own rate lock.

Maybe it is better for you.Maybe not.

If the bank that receives your loan raised prices by an 1/8 percent what would that cost you? On a $300,000 loan only it may only be $24.73 per month. There is no way to know the future on rates. I say, if you guess right you are fortunate. I used to turn CNBC on every morning as the market opened. I always had loans in my pipeline. I cared to be good at this part. It was impossible to always be right. By the way, $24.73 over 30 years is $8,902.37

There is more to the question. Who is, besides you, gambling with your lock? Your loan officer may be. Did he give you a signed lock confirmation? He should have. Even then, did he lock? Maybe not.

His employer may be also. If he the loan officer gave you a signed document (Lock Confirmation) confirming the lock, rate, and fees and chose to play the market for himself, he better deliver what he promised or his employer is on the hook. By the way, if he picked up a quarter in fees by gambling with your rate lock, he makes $700.00 more. That is his car payment for the month.

When the loan officer locks your loan he picks a bank to deliver the loan to. This may be the employer. So do banks gamble with your lock? Probably. Locks cost them money. They make committments to the final investor and the investor commits them the money at a specific rate and fee. This is important for the system. Not all loans make it to closing. So banks generally know about what percent that is, and lock that percent. In a steady market this may work out fine. However, in a market that suffers a fast rise or descent, trouble arises. The worse is a fast rising market. Your mortgage bank may have been used to locking, perhaps 90% of the loan volume they have in their pipleline. But rates went flying up. Guess what? Well to quote one bank manager, we had to deliver 110%. Why more than 100%? Because loan officers cry. There is crying in mortgages. They claim they locked. They say they will pull their business forever. They get the customer on the phone with the bank manager and lie, saying I faxed in the lock form. So now the customer threatens suit. And the poor bank manager closes at a loss.

Gambling like this, or just plain error on locking is a problem that has caused some mortgage banks to close their doors or be sold to a stronger company.

So what can you do? Deal with people you have been referred to as credible. Deal with people that have been around for a good length of time, or work for a company that will stand behind them. I have forgotten to lock loans where it cost me money to close. Any serious, established lender would do the same. A lender you came across as you were rate shopping is the least likely to be honorable.