More on Rate Locks: Is Your Rate Really Locked When Rates Drop?

The trend in the business seems to be to classify lender’s customers into categories. Brokers and lenders alike are grouped, based on pull through, the quality of production, paying fees in a timely manner, and various other metrics. It appears to be very popular, so I decided to try the new Customer Segmentation Program on my dog Sweetie. I based my evaluation on several performance measures, including “minding”, “sitting”, “defending the front door”, and “keeping the kitchen floor clean from spilled bacon, sausages, and steak”. She did well in all categories, especially “minding” when I had a dollop of peanut butter poised above her muzzle. I must try this one on the kids!

Wholesale relationships
Our company has a net branch arrangement, and although we’d rather keep the loans in-house through our mortgage bank, our agents are free to broker out certain products. This was overheard, from one agent: “Once I lock outside our Bank, the lock has to stay with the wholesaler. My office almost lost our Gold Star Quality Partner discount!” I would love for someone to please explain to me why agents feel that they can beat up their mortgage bank all day, every day, yet are timid about doing the same with their wholesaler??? Moving locks will be a moot point if rates continue on this path. Did you miss the Monday afternoon refi boom? Rates moved higher yesterday as the day wore on, and are higher this morning. Although there appears to be a general decoupling between our friend the 10-yr yield (currently at 3.64%), Fannie & Ginnie prices are worse this morning by .125 in price versus Tuesday afternoon’s levels.

As one mortgage bank owner put it, “We have been in contact with our investors and it has been made very clear to us that if we move the lock and don’t close on the ‘best efforts’ lock we will be charged for the loan loss and we stand to be cutoff from future business with the investor. We are required to keep a minimum of 70 percent pull through…we cannot simply get out of a lock without getting hurt. I would rather see us lose the loan before I see my company lose a major investor. Moving locks hurts the entire industry and this is an example of why many lenders are cutting off brokers – we both lose if the loan doesn’t close but at least we will not be charged an expensive pair off fee. I know that this is not what you want to hear but that is the market that we are currently in.”

Lehman news
Rumors are swirling about Lehman. Supposedly the potential deal to secure additional capital between Lehman’s and a Korean bank fell through. Lehman moved up the release of their 3rd quarter results one week to this morning: a $3.9bln loss, much higher than expected. and plans to sell 55% of their stake in Neuberger Berman. Lehman plans to move their real estate assets into a separate subsidiary, called “SpinCo” (?), with the rest of company referred to as “CleanCo”. Lehman has cut their residential exposure by 47%, down to $13.2 billion, although their commercial exposure is much larger. (And many think that commercial real estate will be the next to fall.)

Deposit Insurance
Per the Wall Street Journal, Warren Buffett’s Berkshire Hathaway has told one of its units (Kansas Bankers Surety) to stop insuring bank deposits above the amount guaranteed by the U.S. federal government. They are notifying about 1,500 banks in more than 30 states that it will no longer offer a program called “bank deposit guaranty bonds.” KBS is one of a handful of firms that offer such insurance, a big selling point for banks trying to attract wealthy customers.

According to a story in BusinessWeek, from Experian, small business owners are more willing to default on their home mortgages than on their business debts. Some 312,000 business owners, 2% of the total with mortgages, were at least 90 days late on a mortgage payment at some point between April 2007 and April 2008. This is a lower rate than the broader population of homeowners (almost 4%). It appears that business owners protect their companies even at the expense of their homes to keep their source of income intact.

A man is dining in a fancy restaurant and there is a gorgeous brunette sitting at the next table. He has been checking her out since he sat down, but lacks the nerve to talk with her.
Suddenly she sneezes, and her glass eye comes flying out of its socket toward the man. He reflexively reaches out, grabs it out of the air, and hands it back.
“Oh my, I am so sorry,” the woman says as she pops her eye back in place. “Let me buy your dinner to make it up to you,” she says.
They enjoy a wonderful dinner together, and afterwards they go to the theater followed by drinks. They talk, they laugh, she shares her deepest dreams and he shares his. She listens.
After paying for everything, she asks him if he would like to come to her place for a nightcap and stay for breakfast. They had a wonderful, wonderful time.
The next morning, she cooks a gourmet meal with all the trimmings. The guy is amazed. Everything had been SO incredible!
“You know,” he said, “You are the perfect woman. Are you this nice to every guy you meet?”
“No,” she replies. . .
“You just happened to catch my eye.”

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