WHat options do I have if my refinance rate is locked and rates went down

Call your loan officer and ask to have your rate floated down.  Most large banks have a float-down option. If you are working with a broker, a broker may switch banks to get you a better rate.  I have a dozen files I have switched in the past week because rates have decreased significantly. 

If the loan officer is unwilling to drop the rate, and you have time (and I know some will pounce on me for saying this), switch your bank/lender/broker.  You will be paying this for 30 years, not the loan officer, so get the best deal you can now.  Do your research, do it once, but do it right.

Also, do a quote through Zillow.  You'll see what people are willing to do your loan for, and there are some great professionals on here.

Regards,

Rob Szumilas

Rob,

Great advice.  Your post is an encouragement for borrowers to switch lenders if the rates go down?  Do you want to give the other side of the story and what is involved when a borrower wants to get a lower rate by his or her Lender/Broker? 

So, most large banks have float-down policies? Really?  Why don't you explain what is entailed when a Lender/Broker says, "We have a free float down policy."  Tell us waht it all involves as what you are really saying is that if rates go down you simply switch lenders.  Now tell your borrowers that when you do that you will lower your pull-thru with that investor and then lose your lending abilitities with them.  In a month of so brag about how you only have one or two lenders who you haven't burned by switching locks.

Don't worry about my lenders, or my firm's pull-through.  My reply to Ben was very clear.  

2nd of all, borrower's don't give a damn about all that or our side of the business.  They want the best rate, and if rates drop like this, they should get it.

Rob S.

Benmaklo,

Simply tell your lender you know the rates have gone down and ask him to see if he can lower the rate.  However, if you are doing a no-cost, or if the lender is participating in the closing costs, lowering the rate may not be adviseable because the pricing inside the rates are narrowed drastically: what the investor will pay in terms of compensation (ysp) to the lender/broker for the rate.

I have done a handful of no-cost loans for my borrowers over the past three weeks.  All were locked a few weeks ago.  Easily, I did 5.50 on a no-cost loan with loan sizes around 250k.  Even though the rates went down, in order for me to do the same loan today, the rate would have to be 6.00 and over to cover all closing costs: lender, title and jurisdictional fees.

Most lenders will be willing to work with you to lower the rates.  They want to do the right thing by you.  Just make sure the lender you locked with can lower the rate.  If they locked you with Provident Funding then the rate will have to be re-locked with another investor as PF does not re-lock to lower rates.

Rob,

If you are going to give advice please tell the whole story: educate the borrower on what is involved with re-locking or "Floating Down."  Lenders will adjust rates but not to the market rate of the day.  That is why most lenders say they will renogiated a rate lock and not just float down whenever.  Also, the majority of lenders will only renogiate when the file is received, in underwriting and within a certian time period prior to closing or lock expiring.  And---if you let the lock expire and redo with same lender the borrower has to wait (depending upon the lender) 30 to 45 days to get best market rate.

Again, if you give advice, please educate the borrower.  It is the right thing to do.

Ok Greg.  Good day to you. 

Ben, get the best rate.

Rob S.

Rob,

I see by your quotes you quote a lot of Provident Funding, correct?  They don't have a Float Down, re-lock or any form of renogiatiing rates with the borrower.  Once locked, that's it.  If your borrower wants a lower rate PF tells you to take a hike.  Do you explain that to your borrowers?  I do and that is why my company won't use them in this market because we care about the client and try to always get a low rate and drop it if and when rates do go down.

Greg, again. Don't worry about my business model as I really do have it together and am in no danger of being booted by any lenders, including Provident. 

I am finishing this discussion by saying that I know you take care of your clients and put their needs before yours.  I do the same, so we both really tend to our clients' needs.  There is no reason to bump heads.

Furthermore, rates fell like crazy, and I personally would rather switch banks and retain the client than receive a phone call that they went to another bank on their own due to lower rates.  Then, to them, I look like I don't care and kept the rate reduction a secret.  I can't do that. In Ben's case, he is talking about almost 50 bps.  In his shoe's what would you want?

Greg, take care, and enjoy the refi boom.  I respect your opinion and the way you do business, but disagree with descibing our back-end of the business.  Some clients will just get confused.  I explain many items such as my ysp and commission, but in my opinion, clients most care about the final HUD they'll look at during the closing, not my fall-out % with Provident.

Rob S

Rob,

Borrowers always deserve the best rates.  That is a given.  When borrowers decide to lock there is a risk and reward in doing so.  If rates go up, they are happy.  If rates go down, many get frustrated.  They look to us for answers.

I, as well al the majority (I hope) discuss these matters with borrowers.  If they think the rates will get better and want to take the risk, I register the loan and float the rate until they ask otherwise.  Many borrowers are not the risk takers they imagine themselves to be.  If a floating rate will make them edgy then they need to lock and be done with the matter.  If the rates really drop, of course it is out duty to inform them and get them the better rate.  But, not for an 1/8 drop!

Ben, I would say that you should follow Rob's advice in this instance. We are not talking about a .125% change in rate, but a much larger one. If your current lender refuses to work with you on this, then it is your right to go somewhere else. A change of .125 or even .25 is not really a big deal. But .5% or .375%, at the higher loan amounts, makes it more worth it. My last Zillow closing got a rate .625% lower than where we locked, so it can and does happen. And that was without changing lenders- just a good renegotiation policy. We are here because of consumers, banks lend TO consumers. So for them to be stubborn and say 'no, what if rates went up??' in this climate, would be pretty stupid on their part. Keep the client happy, and you keep the client!

Good luck :)

This is the kind of market that makes me wish rates were rising instead of falling. Zero loyalty from customers. I have a borrower that I have been working with for MONTHS...given pre-approvals for a number of contracts that never got signed, been to their home, spent hours with on the phone nights, weekends, etc helping them through the process. They were finally locked last week after signing a contract (and being a portfoio lender we do have a float down) and guess what? They get a call from another broker offering a better rate (today) and all of a sudden my efforts are solely based on todays quote. Heck we might be 1% lower by the time they close but all they care about is the fact that one other guy quoted a better deal today... same old story..."thanks for your help, we'll refer our friends to you, but someone we've never heard of is slightly lower today and...you know...over 30 years...yadda yadda" Give a rising interest rate environment any day

NJ- agreed! How far off are you from what this other company is offering? Just curious, as I want to know what consumer expectations are. Will they leave for .125%? I hope NOT!!!

Funny story though- gas prices in CT are about 1.70+ for regular. Two months ago, they were probably 2.70. When i went to New Jersey this weekend, I didn't stop at just ANY gas station, I still wanted the best deal. So while I should have been happy with anything under $2, and ECSTATIC with anything under $1.70, I still went to the cheapest I could find... which was $1.43. I drove right on by the $1.50, $1.57 etc... It's strange how in such a short time, our expectations change. Two months ago, I would have started crying tears of joy at $2.50. Now $1.50 isn't good enough????? :) It's the SAME EXACT DEAL with the mortgage rates. Funny, isn't it?

I think the OP has a good idea about his options at this point. The drastic dips in the markets are not as common as the age old argument of what to do when rates drop after locking? As a Broker or Correspondent, secondary market relationships are evaluated over many areas with one being lock fallout which is weighted significantly in the formula. Greg is correct, the broker runs the risk of losing investor/secondary market relationships once their "threshold" of fallout is exceeded. Rob is correct, it is his business and his fallout to manage. Rob stated:

"I have a dozen files I have switched in the past week because rates have decreased significantly."

It sounds as if you do this with or without a request from the borrower. Again it's your business - I am commenting on your statements in a public venue. My concern is as an industry we may find as the consolidation continues, business channels and procedures may continue to change as well. Why- because the secondary market players left standing will continue to evaluate where they take losses- what policy's and procedures contributed to the losses over the years.

We have discussed this previously and this still makes the case for an investor to not "offer" the option of an extended lock without a fee. Obviously - in the OP's opening post - his LO locked prior to application or having any signatures. This will reflect on his business and his company's fallout. My only point as an industry  we may see "Lock Fallout" addressed after the AMC policy and procedures are in place.

I know some will say - well until then enjoy the refi boom!

Enjoy-

Good analogy Jenn. I agree with Greg. The borrower is given a choice when to lock. If they decide to lock and rates go up, they made a great choice. If rates go down, they still chose to lock.

As Doug pointed out we are just a commodity to those that do not honor their commitment, regardless of how hard we worked for them. When someone spends the time that Doug did, with his example above, causes borrower's fees to increaes by the broker and by the lender. All business has a profit margin that must be maintained, to remain financially healthy.

Everyone, wants to be "nice." But, a win-win solution for this type of borrower's mentality, must be sought by all. Continuing in this manner, can be far too costly for all of us!

ben,

The current system is a "pay on delivery" and your loan has not been delivered.  When abrupt changes (for the better) happen in the market.. these things do happen.  Not very often and it does put us (LO's) in a precarious position.  The truth is that there is some type of cost and there are "agreements" made between us and these lenders.. If they are abused too much, then there are costs (bills) and consequences.  However, this is really a system glitch and not yours. To solve it,  all lenders would simply need to take in a lock fee.. from the LO and then from you.  In the real world, had you bought a shirt from MACY's for $60 and had your receipt with you and went back 5 days later and it was $20... MACY's might try to crawfish to avoid refunding you the difference, but the "rules" are that you can return your shirt with the receipt and get your $60 back and then repurchase the same shirt for $20... (1 way or the other, yo uare getting the shirt for $20). These are the rules for the consumer and currently there are not penalties. That is why you receive this 2-sided (moral)information.  We have "gentleman's" and written agreements about "delivery" regardless of rate environment, but there is nothing stopping the borrower.  You have done nothing wrong and although somebody is going to lose out, we are actually appreciative that we are even having this discussion to complain about.  If rates went to 7.5%, nobody would be writing any real business so it is like a tax problem.. It is a problem, but it means we made a living to have a problem about.  keep rockin'.

Well said Martin. My "Macy's" thought on this is what was shown on local news a few weeks ago. A lady needs a nice outfit to go to a special function or a job interview. She goes to Macy's to pick buy it. She leaves the price tags on. Wears the outfit to the fuction. Then returns it "unused" afterwards.

Macy's and other retailers are aware of this abuse. Although, they must honor the return. Then the outfit is either marked down, given to charity or destroyed. The end result is higher margins of profit to cover the expense created by this abuse. Everyone else pays for this misconduct.

Rudi,

I am aware of the lack of rules governing responsibilities for consumers and LO's as well.  I had my 2nd loan ever (20 years) rescind.. I did get an invoice for the pare off fee from lender "A", but was very honest with my client about going to lender "B". It was HANK's fault as he is a moron, but HANK's fauxpas is a refinancing customer's favor and with the landslide gap.. (my client's was .50 at same LTV.. .875% drop when the LTV was reduced 5%) it was a decision my client made on last day of rescission.  I was billed, but also thankful that I was retained so that I could afford the pare off bill.  Others may not unload the "laundry" and specifics as to what may or may not be the penalties, but I think it  will be a factor in determining LO clientele in 2009 (lock pull through and retention).  keep rockin'.

Rudi- but you will LOSE the client. And then what??? These days, clients are seeing drops of .5% or more in a very short time. We are not talking about .125%, or $500 in fees. Those clients can go shop around to their hearts content for all I care. What I, and I think Rob, are talking about is the phenomenon where someone locks, and then 3 weeks later rates dive. It's not our fault, it's not the banks fault. It just HAPPENS. To suggest that a client SHOULD stay with us and honor their 'commitment' is idealistic- it just won't happen. So, do you let the deal go? Or do you switch investors? I guess you let the deal go, because how in good conscience could you CLOSE them at the rate you locked them at? I know I couldn't do that to someone. If I knew rates dropped .625%, and I couldn't match it, I would refer it out. Don't believe me, I don't care. I know who would get that business :)

Hopefully this is a moot point, and these rates will stay for a good, long time. Artificially propped up by the taxpayer or not, let's hope we don't see a 1% swing in two months, and hopefully not even for 6 months.

"Call your loan officer and ask to have your rate floated down. Most large banks have a float-down option. If you are working with a broker, a broker may switch banks to get you a better rate. I have a dozen files I have switched in the past week because rates have decreased significantly. "

I always scratch my head when I read things like this.

1. When your lender/broker locks your loan in they will typically do it as a best effort or mandatory lock.

2. the names alone tell you that the 1st option has a little more freedom.  If it doesn't close the broker/lender is not on the hook but they will certainly get on the radar if they continually have fall out.

3. Either way you look at it the lender/broker that just switches banks is not making a best effort to honor the lock they told a lender they would deliver.

This is just my .02

Do you really want to work with someone that thinks so little of a commitment that they will so redily break 12 commitments they made.  Sure in this instance that action may save you money...Will it next time?

A measure of ones character is when they keep their commitments when it's hard, not when it's easy!

Tamm and MW, losing a customer is not the best way to grow your business. I that I agree. Losing Tier Discounts makes you less competitive, not so good. Losing Lenders, you could soon be out of business! This is a very strange market rifgt now and may continue for some time, with great rate fluctuations in very short periods of time.

We don't dictate these policies, lenders do. More and more lenders have decided to abandon the wholesale channel. They can do retail on their terms. Application fee, lock in fee, commitment fee, use their appraisers and not have to hear our complaints. All of us need to set a good example to our lenders and our customers. To flourish, we need both. But, without lenders, the curtain comes down, not intermission, it's the end. 

RC,

I saw a stat today that broker origination's make up only 18% of all originations.  Lowest % I can remember.  The curtain may be coming down and not honoring commitments may contribute to the End.... not the intermission!

Andrew,

You are funny.  If that is the case then why am I so slamming busy?  I am brokering 90% of the loans.  I haven't even seen the Fat Lady let alone hearing her clear her throat to start the song that you want to hear  :-)

Andrew, exactly my point. 18% is still not chump change. But, we all need to be careful. What we do as a whole, reflects on all of us.

I think that the Brokers who are one man bands, so to speak will be going  by the wayside but not the ones who have a company, processing staff etc.  When the Broker's business phone number is the same as the cell phone number then that is an indication . . .

AA,

I agree about commitments and that is why I contacted the lender.... asked for renegotiation...  was advised NO (I had locked it mandatory..10 day delivery and at the time.. that rate was a squeeze to make it happen at 6.375%)... I knew the rules... asked them to "be gentle" and send me the invoice.  I discussed this "charge" to me with my client and he still felt it was best to go.  Thankfully, this has only happened 2 times in 20 years and it is not pleasant, but honoring a pareoff fee makes me sleep better at night besides knowing what my delivery percentage is.  2009 may continue to squeeze players though and the big cats will not forget, so it is a bigger deal than  just casual, but until a consumer is asked to have "skin in it", this will be an issue behind the scenes.  People do not buy stock without money, but again, this really was a very abrupt downturn that took place in hours, not months. "G", glad to know you are crankin'.  We are stirring a little in Otown..  but have more equity issues and LTV issues than we did last month, that's all. keep rockin'.

"G", What if the Broker's business phone is really...?

Good luck with your processing staff when no lender is doing wholesale or correspondent lending.

Greg/Jason,

Don't mis understand what I am saying, I broker business as well as direct lend.  Loosing the ability to broker impacts my business as well.  Step back and look at the numbers.

2-3 years ago broker originations were well over 50% today that number is 18%.  Loosing more than a 50% market share is not a good thing, particularly when the pie is shrinking.  I truely hope that it's a pendulum swing and it will eventually come back.

It is my opinion that brokers just switching banks and not honoring commitments, best effort or otherwise will make it, easier for lenders to downsize or eliminate the broker channel.