topic Re: View from a Lender...Rates get lower suit OK to bail? in Mortgage Loans

View from a Lender...Rates get lower suit ok to bail?

Anonymous — Wed, 14 Nov 2012 07:03:59 GMT

As a loan officer I wanted to get a little input....From time to time after a customer agrees to terms and locks their rate in, rates get slightly better. Rates are volatile currently so a rate on one day has a different rate/fee another. After I have been diligently working on a customers Mortgage for weeks,they demand the new lower rate or will switch lenders. This is often over only a.125% better rate. A lock is a mutual agreement from both parties that the rate is Guaranteed even obviously if rates go higher. They feel no obligation despite the work and expense of ordering credit reports, tax certs, flood certs, payoffs, etc. Im old school where someone's word means something so I don't get the usual wording of "just looking out for my family" line. Not over such a trivial amount. No Bank really negotiates over .125% improvement. If they did I woukd spend all day long chasing rates. When you hear "float down" again it's over a significant move. I think of it like hiring a mechanic to fix your car and then after work has already been done, you go with a new lower estimate leaving them high and dry. Thoughts? I'm sure there are some on here that only look at the numbers and nothing further...

Re: View from a Lender...Rates get lower suit ok to bail?

Anonymous — Wed, 14 Nov 2012 13:46:45 GMT

My $.02- borrowers who go with a lender offering a lower rate are making a business decision. Even if the rate with their new lender is only 1/8 lower as you wrote, they still save money over the life of the loan, and that's what matters. Lenders operate the same way- this board is littered with stories of people who've spent months working with a lender, only to be declined at the 11th hour. The lender isn't concerned that the borrower spent money on inspections, an appraisal, etc., and that the seller, realtors and closing agent will be affected. Their decision to decline that borrower is based on business needs, not emotion, and borrowers have to think the same way. I remember you posting in another thread that you would never originate a loan for $55k because it was too much work, for no money. You make a business decision when you choose to turn down loans under a certain amount, and borrowers have the same right- to make a business decision that's in *their* best interest.

Having worked in the mortgage industry for several years, I fully understand that it's frustrating to work on a file, only to have the borrower go with another lender, but I had to remind myself to look at the situation from the borrower's perspective- if they can reach their goal (e.g.- getting the keys to the home they want) and pay less money to do so, why wouldn't they? I know I sure would! Losing deals to a competitor with lower rates is an inherent part of the business. Yes, it sucks, but ultimately, the borrower is the one responsible for repaying the loan, and they have to do what's best for them.

Re: View from a Lender...Rates get lower suit ok to bail?

webhopper — Wed, 14 Nov 2012 19:45:03 GMT

@Anonymous wrote:
As a loan officer I wanted to get a little input....From time to time after a customer agrees to terms and locks their rate in, rates get slightly better. Rates are volatile currently so a rate on one day has a different rate/fee another. After I have been diligently working on a customers Mortgage for weeks,they demand the new lower rate or will switch lenders. This is often over only a.125% better rate. A lock is a mutual agreement from both parties that the rate is Guaranteed even obviously if rates go higher. They feel no obligation despite the work and expense of ordering credit reports, tax certs, flood certs, payoffs, etc. Im old school where someone's word means something so I don't get the usual wording of "just looking out for my family" line. Not over such a trivial amount. No Bank really negotiates over .125% improvement. If they did I woukd spend all day long chasing rates. When you hear "float down" again it's over a significant move. I think of it like hiring a mechanic to fix your car and then after work has already been done, you go with a new lower estimate leaving them high and dry. Thoughts? I'm sure there are some on here that only look at the numbers and nothing further...

As a borrower, if rates dropped 0.125% I would want to be in on it and realize some lower rates, even if they were in the form of more "discount points" applied toward my loan. In some ways I feel as though banks rely on a good Yield Spread Premium in that they won't issue the clear to close or fund the loan until the yield spread is most ideal for them. This leaves borrowers at a disadvantage.

My latest lender actually increased the amount of points I was "getting back" as a direct result of the interest rate dropping during my lock period. Its nice to work with people when you feel as though they are trying to uphold integrity.

Re: View from a Lender...Rates get lower suit ok to bail?

beb86 — Wed, 14 Nov 2012 19:57:11 GMT

+1 on webhoppers and the post above....I think your missing the point, yes you have worked very hard for a few weeks for us where we may have been working for months or years to clean up credit, or save, or just to get ready to be in a situation where we can have a mortgage and yes it is a business decision and over 15 to 30 years I want to save every dollar I can, put it into retirement, and watch the magic of compounding interest.

Re: View from a Lender...Rates get lower suit OK to bail?

Anonymous — Wed, 14 Nov 2012 20:07:50 GMT

I guess I look at things a bit different. Once I make a decision then Im done...No more shopping. If there was a significant move OK but there is no way I would ever put whoever Im working with in a bad situation because I saved a few extra bucks due to daily rate changes. I think of it as hiring a painter to paint your hose...Having him put in on his schedule..Get supplies...start painting and then someone comes along and knocks the brush out of his hand because he just got a new slightly lower bid. A significant change in rates and Im on their side all day long but in my opinion have some ethics and not put a few dollars you can save at someone else's expense. If everything was looked at in that way my wife would have left me years ago for someone better that came along. Im wondering how some would feel if they got fired because their company could hire someone for 50 cents less an hire...lol

Re: View from a Lender...Rates get lower suit ok to bail?

beb86 — Wed, 14 Nov 2012 20:10:55 GMT

Yeah but replacing a painter where you may have found a lower bid is like switching to a different LO.... Wanting the lower rate is more like showing the painter a coupon from there website after the have started painting

Re: View from a Lender...Rates get lower suit OK to bail?

Anonymous — Wed, 14 Nov 2012 20:28:57 GMT

@Anonymous wrote:
I guess I look at things a bit different. Once I make a decision then Im done...No more shopping. If there was a significant move OK but there is no way I would ever put whoever Im working with in a bad situation because I saved a few extra bucks due to daily rate changes. I think of it as hiring a painter to paint your hose...Having him put in on his schedule..Get supplies...start painting and then someone comes along and knocks the brush out of his hand because he just got a new slightly lower bid. A significant change in rates and Im on their side all day long but in my opinion have some ethics and not put a few dollars you can save at someone else's expense. If everything was looked at in that way my wife would have left me years ago for someone better that came along. Im wondering how some would feel if they got fired because their company could hire someone for 50 cents less an hire...lol

Why doesn't your employer eat the 1/8 to save a loan? If it's such a trivial amount, why isn't your employer willing to eat it, save the loan, and possibly gain some repeat business from that borrower the next time they're looking to finance?

I agree with another poster upthread who stated you're missing the point- you're looking at everything from the perspective of what's best for you and your wallet, and the borrower is doing the same thing. It's their right. Also, some of the tasks you cited in the initial post (ordering flood certs, payoffs, tax transcripts,) are maybe 15 mins worth of work and costs the lender a nominal amount. Those duties are typically handled by the processor, anyway, not the LO. If you're losing too many deals because of higher rates, maybe it's time to work for a lender who offers more competitive rates.

This isn't an issue of ethics. Locking the rate doesn't contractually obligate the lender to lend, or the borrower to close.

Re: View from a Lender...Rates get lower suit ok to bail?

Anonymous — Wed, 14 Nov 2012 20:29:15 GMT

I think most dont understand how rate locks work....There are two ways to finance your Mortgage mainly. Through a Broker or through a direct lender.

A broker and you will agree to terms and then he will lock your rate at those terms with Joe Blow Bank. Thats it...Rates locked nothing changes for him or you despite movement of the markets. Since the markets are very volatile, YSP or yield spread for that given rate varies widely day to day. On one day for example a given rate may pay $2,000 in YSP while the next day it may pay nothing. The only real option a broker has is to re-lock with another Bank if rates go lower. Why do brokers not want to do this? Well, for one you have to resub everything to the new Bank but most importantly when you do not deliver a loan that has been locked, you create whats called "lock fallout" from that Bank. In other words you hurt your reputation for not delivering locked loans and soon you will also take a price hit from that Bank because they are tired of dealing with setting aside funds for their portfolios that you never deliver. So when a customer bails, it hurts you financially in more than one way. You also have the cost of pulling credit reports, ordering payoffs, tax certs, etc...Lots of work in a loan and you are paying people on top of this based on your authority and agreement that you both agree to the terms of a loan.

As far as a direct lender goes....They too have set YSP's that change everyday and as a Loan Officer, you are also tied to that rate lock more so than even a broker is because YOU are the Bank. The Bank doesn't renogiate terms with a small loan. In most cases you DO NOT have to lock your loan. But if you choose to thats it...terms are set. To me it comes down to integrity and honoring what you agreed to vs bailing because the wind changed direction slightly to your favor. Dont get me wrong...Im not Mr Ethics or perfect, but you will ALWAYS see me honor our rates.

Re: View from a Lender...Rates get lower suit OK to bail?

webhopper — Wed, 14 Nov 2012 20:33:15 GMT

@Anonymous wrote:
@Anonymous wrote:
I guess I look at things a bit different. Once I make a decision then Im done...No more shopping. If there was a significant move OK but there is no way I would ever put whoever Im working with in a bad situation because I saved a few extra bucks due to daily rate changes. I think of it as hiring a painter to paint your hose...Having him put in on his schedule..Get supplies...start painting and then someone comes along and knocks the brush out of his hand because he just got a new slightly lower bid. A significant change in rates and Im on their side all day long but in my opinion have some ethics and not put a few dollars you can save at someone else's expense. If everything was looked at in that way my wife would have left me years ago for someone better that came along. Im wondering how some would feel if they got fired because their company could hire someone for 50 cents less an hire...lol

For me it boils down to performance and integrity. If I get that shady feeling... I start asking questions and doing more and more research. If I don't like what I find, then I am not afraid to bail. If I hire a painter to paint my house with premium exterior latex paint, I expect him to finish the job quickly enough so that the quote is still relevant. Think of it as being seasonal work. If I sign a contract in spring for him to paint, that's great! but if he waits until winter to paint, so that he can paint during the "slow season..." I expect a discount, as contract work done during the "slow season" is usually priced better than "peak season"

Don't make me sign a contract and then pick what time is best for you to actually do the work.

Re: View from a Lender...Rates get lower suit ok to bail?

Anonymous — Wed, 14 Nov 2012 20:33:16 GMT

Why dont we eat the 1/8th a point? Because in our situation we are at the cutting edge of pricing when we originate a loan. We are very agressive with rates so there literally is no room left. Most times if we lowered the rate 1/8th a point we would actually loose money on the loan. If we were charging higher rates then yes there would be room. For example, we are usually .375% - .5% lower in rates than the big banks like BofA. Wells, etc.

Re: View from a Lender...Rates get lower suit ok to bail?

Anonymous — Wed, 14 Nov 2012 20:35:04 GMT

Just ordering the required certs is several hundered dollars by the way...and certainly takes much longer than 15 minutes to do.

Re: View from a Lender...Rates get lower suit ok to bail?

Anonymous — Wed, 14 Nov 2012 20:43:44 GMT

@Anonymous wrote:
Just ordering the required certs is several hundered dollars by the way...and certainly takes much longer than 15 minutes to do.

I worked for several lenders, and none of them paid or charged hundreds of dollars for certs. A flood cert takes less than 1 minute to order, and is delivered within minutes barring system issues. Same with CBRs, etc. Payoffs are ordered by phone or online, and also take only a few minutes to order. The lender is not putting out hundreds of dollars, or spending significant amounts of time ordering these docs.

Re: View from a Lender...Rates get lower suit OK to bail?

Anonymous — Wed, 14 Nov 2012 20:50:53 GMT

For me it boils down to performance and integrity. If I get that shady feeling... I start asking questions and doing more and more research. If I don't like what I find, then I am not afraid to bail. If I hire a painter to paint my house with premium exterior latex paint, I expect him to finish the job quickly enough so that the quote is still relevant. Think of it as being seasonal work. If I sign a contract in spring for him to paint, that's great! but if he waits until winter to paint, so that he can paint during the "slow season..." I expect a discount, as contract work done during the "slow season" is usually priced better than "peak season"
Don't make me sign a contract and then pick what time is best for you to actually do the work.

You hit the nail on the head, Webhopper. That's what's motivating these people to look for better rates, and ultimately go with another lender. There is some aspect of the deal they don't feel comfortable with, and that's why they keep looking. When people are satisfied, they typically won't go out looking for something better.

Re: View from a Lender...Rates get lower suit ok to bail?

beb86 — Wed, 14 Nov 2012 20:48:15 GMT

I do see where you are upset but if you go the extra mile for someone the are more likely going to recommend you to friends, family, and coworkers so its a win-win. I locked in my rate at 3.875 and a week later it dropped to 3.75 I didn't run to the LO demanding him to change it I just left it alone but have I would have asked he would have changed it....I had a great relationship with my LO and in turn have sent him a lot of business.

Re: View from a Lender...Rates get lower suit ok to bail?

Anonymous — Wed, 14 Nov 2012 20:53:00 GMT

Credit report cost about $18..Flood certs $24, IRS Tax Trans $26, Fraud Guard $45, DU Findings $20,Payoffs $15, VOE $15 each burrower. And it takes a couple of hours not 15 minutes to get all of this done on top of the appraisal cost of $400-$450 (No More drive by appraisal allowed by Fannie). In the past we didnt even collect upfront for appraisal but got burned too many times. Maybe you worked in the industry in the past but there is a TON MORE WORK now a days and cost associated with a Mortgage.

Re: View from a Lender...Rates get lower suit ok to bail?

beb86 — Wed, 14 Nov 2012 21:00:11 GMT

It is starting to sound like you are ranting about your job and not happy with your job anymore. I hope I'm wrong. In the customer service industry you have to do what it takes to make them happy. I have been in restaurants for the past 10 years and I know all about everything that goes on behind the scenes that people don't see. The cost, hours, preparation, etc. But at the end of the day its all about the customers since they pay my bills and I love my job.

Re: View from a Lender...Rates get lower suit ok to bail?

Anonymous — Wed, 14 Nov 2012 21:04:56 GMT

Ok...I was afraid this would turn into an attack the poster thread. I was simply giving though for others to consider. In ANY situation I have always looked at it as a mutual partnership where both parties are happy. I tried to respond to others post about what gows on behind the scenes. Thats it. There are always things in any situation that arent perfect but knowledge is the key. Ive got a great job.

Re: View from a Lender...Rates get lower suit ok to bail?

ceejx — Wed, 14 Nov 2012 21:10:56 GMT

@Anonymous wrote:
As a loan officer I wanted to get a little input....From time to time after a customer agrees to terms and locks their rate in, rates get slightly better. Rates are volatile currently so a rate on one day has a different rate/fee another. After I have been diligently working on a customers Mortgage for weeks,they demand the new lower rate or will switch lenders. This is often over only a.125% better rate. A lock is a mutual agreement from both parties that the rate is Guaranteed even obviously if rates go higher. They feel no obligation despite the work and expense of ordering credit reports, tax certs, flood certs, payoffs, etc. Im old school where someone's word means something so I don't get the usual wording of "just looking out for my family" line. Not over such a trivial amount. No Bank really negotiates over .125% improvement. If they did I woukd spend all day long chasing rates. When you hear "float down" again it's over a significant move. I think of it like hiring a mechanic to fix your car and then after work has already been done, you go with a new lower estimate leaving them high and dry. Thoughts? I'm sure there are some on here that only look at the numbers and nothing further...

I'm in 100% agreement with you. The lock in is a risk/reward. You have the potential risk by locking of losing a lower rate if you wait, but with the comfort of knowing you're not risking a higher rate. If the interest rate jumps 2 points the next day, the same people would be singing your praises for locking in the lower rate for them. They need to understand that while they might lose a small decrease after the lock-in, they are protected from a potential small to large increase at the same time.

Re: View from a Lender...Rates get lower suit ok to bail?

Anonymous — Wed, 14 Nov 2012 21:17:44 GMT

@Anonymous wrote:
Credit report cost about $18..Flood certs $24, IRS Tax Trans $26, Fraud Guard $45, DU Findings $20,Payoffs $15, VOE $15 each burrower. And it takes a couple of hours not 15 minutes to get all of this done on top of the appraisal cost of $400-$450 (No More drive by appraisal allowed by Fannie). In the past we didnt even collect upfront for appraisal but got burned too many times. Maybe you worked in the industry in the past but there is a TON MORE WORK now a days and cost associated with a Mortgage.

Excluding the appraisal, which is borrower paid, and which you state your employer now collects the fee for upfront, the bank is *charging* $163, which isn't actually the true cost to the lender. The lender is not out hundreds of dollars after ordering these items.

The other tasks are not hours worth of work- sorry, but they're just not. If it takes any processor several hours to order a CBR, flood cert, and payoff, they should be looking for a new job, because they are horribly inept. Even ordering tax transcripts isn't time consuming- it takes a few minutes. Fully verifying income and assets requires more scrutiny now than in the past, so I 1000% agree that's more time consuming, but the most intense scrutiny is coming from the UW, not the LO. If borrowers are bailing before the clear to close, the UW typically hasn't spent a lot of time on the file.

I think you should ask yourself why these borrowers feel compelled to keep looking after they've locked their rate. To me, the bigger issue is why they felt uncomfortable enough to keep looking, and what can be done to secure their trust and loyalty so that they feel no inclination to go out looking for a better deal.

Re: View from a Lender...Rates get lower suit OK to bail?

Anonymous — Wed, 14 Nov 2012 21:19:14 GMT

Unfortunately in today's world they don't understand or worse really don't care. Its like having your cake and eating it too as long as you don't care that your word means nothing. So you are protected from any upside movement and if rates go down even .125%, you can just bail. Sad that now a days that's perfectly fine and somehow I am the one missing the picture??