I'm locked, rates have dropped... what to do?

Anonymous · ‎07-10-2009

I was house hunting for a few months with pre-approval quotes around 5% for an FHA loan. Obviously, they were shooting up for a while, hitting 6% one day. So, about to go to contract, I locked with a broker at 5.5%, no points, no origination fee... felt like it was a safe bet.

Appraisal went great, house appraised for 15K more than selling price and no FHA health or safety issues. Sailed through automatic underwriting and broker thinks I should get final approval with stips and conditions monday.

Now, rates have dropped and it looks like I could lock pretty close to 5% again. diff is 112 bucks a month. This is my first house, so I'm probably just driving myself crazy here. I didn't negotiate a float down, so I'm guessing if I wanted to lock at a lower rate I'd have to start all over - different bank, new appraisal, etc?

If that's the case, likely wouldn't be worth it. Probably not worth it anyway. I mean, given a great appraisal in a declining market etc, should I just avoid rocking the boat. In any case, this board is great and a wonderful place to vent if nothing else.

thanks!

DallasLoanGuy · ‎07-10-2009

people need to lock their rate and stop looking at rates.

if they would have gone up(they very well could have) would you be looking to change your rate?

i have had people drop me and go with another lender when rates dropped .125%..... hard to make a living when people do that to you.

i always quote high.... in the hopes that i can deliver a good surprise to my clients and run off rate shoppers

Retired Lender

lostinlala2 · ‎07-10-2009

Geeesh. Make me feel worse than I already did! We just relocked with a broker (originally going directly through bank--with a guy we are friends with) for 0.25% and almost half a point less. I just sent all the papers yesterday.

We plan on staying in this house for a long time...it could save us almost $15000. I don't know if LO make commission so to speak, but even he told us to take the deal. Maybe he just wanted to get rid of us because we were rate chasers but I think he was being sincere.

This whole house hunting, price negotiating, rate shopping, signing my life away process has been hard on the nerves...but I think the hardest part about it was having to pick one loan guy over another. Especially dropping a deal with a friend. Cold, huh?

For what it's worth, I posted a similar question just a few days ago and was answered by someone who wasn't on the lending side...they said give LO a fair shake and then do what's best for you. I wish one of the LO or brokers had chimed in too. It might have convinced me to stay with the original LO.

I still don't know if we made the right choice. In a week or so, I guess maybe I'll feel less guilty because we will have reached a point of no return so to speak, but I still can't help wondering...is it more important to save my family money or to be a nice person? I can't help but feel greedy, but that's just me.

DallasLoanGuy · ‎07-10-2009

@lostinlala2 wrote:

Maybe he just wanted to get rid of us because we were rate chasers but I think he was being sincere.

Didn't mean to make you feel bad.

But a lot of the god loan officers will likely give you the same advice.

I have even heard of people taking two seperate lenders all of the way thru underwriting and clear to close....

If that were to happen to me, I would report them as potential fraud.....

People used to try and double fund deals for profit....

Retired Lender

Anonymous · ‎07-10-2009

Why can't lenders "unlock" you and give you a better, current rate? I realize that defeats the purpose of the word "lock" but my point is the same. If it's bad for consumers to get locked and bad for LO's to have rate chasers... wouldn't that solve the problem?

Why lock rates at all?

DallasLoanGuy · ‎07-10-2009

@Anonymous wrote:

Why lock rates at all?

because rates could go up

a lot goes into locking a loan. it is not some flippant thing we do.

money is hedged for a future sale with that interest rate.... this is big time wall street business of selling loans.

if this is a problem for you, find a lender with a float down option. i havent seen it in a while.... and the rates werent as good as the rest. but it was an option.

Retired Lender

Anonymous · ‎07-10-2009

I wasn't trying to be difficult, i was genuinely curious

The way i see it though and i might not have grasped it well... rate locks help in making money on loans, right? Because it's essentially gambling the lender/broker/whatever stands to make money on an increase or lose it with a decrease, correct?

So if it's just part of the system, i don't understand why lenders would be upset with rate chasers. A good, responsible consumer will go where the best deal is. It's not as if consumers have a choice in whether or not they participate in a rate lock system... it's the only option.

The only thing that would keep me loyal to a lender (or any business for that matter) would be exceptional customer service. That's worth more than $15k over the next 30 yrs to me.

I think the system is broken, personally... if i understand it, that is

lostinlala2 · ‎07-10-2009

@DallasLoanGuy wrote:

a lot goes into locking a loan. it is not some flippant thing we do
money is hedged for a future sale with that interest rate.... this is big time wall street business of selling loans.

What exactly do you have to do to lock a rate? Could I have cost our Wells Fargo guy money by switching after lock in? His job?

@DallasLoanGuy wrote:

if this is a problem for you, find a lender with a float down option. i havent seen it in a while.... and the rates werent as good as the rest. but it was an option.

For anyone who might be interested, we actually had a lock in with free float down from both lenders, but the first required 3/8 percent drop and the second required only 1/4.

DallasLoanGuy · ‎07-10-2009

@Anonymous wrote:
I wasn't trying to be difficult, i was genuinely curious

The way i see it though and i might not have grasped it well... rate locks help in making money on loans, right? Because it's essentially gambling the lender/broker/whatever stands to make money on an increase or lose it with a decrease, correct?

So if it's just part of the system, i don't understand why lenders would be upset with rate chasers. A good, responsible consumer will go where the best deal is. It's not as if consumers have a choice in whether or not they participate in a rate lock system... it's the only option.

The only thing that would keep me loyal to a lender (or any business for that matter) would be exceptional customer service. That's worth more than $15k over the next 30 yrs to me.

I think the system is broken, personally... if i understand it, that is

rate locks also protect you should 5% go to 5.5% in a matter of minutes.... i have seen it hapen.

that part isnt broken

Retired Lender

DallasLoanGuy · ‎07-10-2009

@lostinlala2 wrote:
@DallasLoanGuy wrote:

a lot goes into locking a loan. it is not some flippant thing we do
money is hedged for a future sale with that interest rate.... this is big time wall street business of selling loans.

What exactly do you have to do to lock a rate? Could I have cost our Wells Fargo guy money by switching after lock in? His job?
@DallasLoanGuy wrote:

if this is a problem for you, find a lender with a float down option. i havent seen it in a while.... and the rates werent as good as the rest. but it was an option.

For anyone who might be interested, we actually had a lock in with free float down from both lenders, but the first required 3/8 percent drop and the second required only 1/4.

we supply our lock desk with your name, social, address..... and request a lock.

money is hedged based on that lock.(big time wallstreet finance stuff)

broken locks cost the company money sometimes.... but those losses are priced into the rate because we know that we will have some fall out.(loans dont close for whatever reason)

the market is giving us good rates right now.... but the lenders arent passing it all along to the borrowers because their costs of broken locks is really high right now.

you see.... it is kind of like traffic.... everyone can cooperate and get home on time. but noone does.... so there is a traffic jam.

humans are involved... they are risk averse....

if people wouldnt break locks.... we would be in the 4s right now on rates..... you can take that to the bank.

no, the lo wont lose their job.

fallout is a part of the business..... we play the hand we are dealt and hope for the best.

i make more money when rates are going up or down. i make LESS(much less) when rates are choppyt like this.

you see.... humans see that a .125% drop in rates will save them money. they dont see and dont care that a .125% INCREASE will costs them money.... because they know that they can break a lock and screw the lender... because they are risk averse and have found that bylocking a good rate they cant lose.... and if rates drop, they can break their commitment.

and people point at loan officers and call them greedy

just the facts.

you asked

Retired Lender