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Consumers are much more aware of interest rate changes than they were when I first became a loan officer in 1993. 

Because of this increased awareness, our loan officers constantly have to answer the question “What if rates go down after I lock?” and “Rates are better today, can I get a better rate or am I going to have to apply with another lender?” 

We deal  with this as best as we can but our investors (Chase, Citi, Wells, Countrywide etc…) will tell you that our pull through is less then desired. 

In the past couple months we have experienced the following:
1 – Chase emailed their correspondents (maybe brokers too – not sure) that they have the “right” to charge us a “pair-off” fee for a best efforts lock we don’t deliver them and close with another investor.  With MERS this becomes an easy thing for them and other investors to track.
2 – Citi has implemented a policy if a best efforts lock we present them is already locked (correspondent, wholesale or retail) they will not accept the new best efforts lock from us.  They will however accept the lock for mandatory delivery at our price requested.  With that option brings  the risk of non-delivery and a pair-off fee.  Citi changed their “re-negotiation” policy to be slightly more user friendly.
3 – AmTrust is now sending a list of loan locks with them the next day as well as a list of locks about to expire.  No hammer yet but they’ve shown it to me.
4 – Countrywide has told me that pull-through is a much bigger issue this year with them and our pricing is being impacted by our pull through rate. 

A few other things to note.
1 – Spreads between best efforts deliver and mandatory deliver have widened from give/take .20 on conforming fixed to .50. 
2 – Investor production and associated profits from Alt A, Sub-prime, Expanded Criteria, Equities, Option ARMs etc.. have dropped to almost nothing.  Investors now have to make money on Fannie and Freddie product.  They can no longer treat this product as a break even or loss leader. 
3 – There are fewer players in our mortgage origination industry.  Fewer brokers, correspondents, investors, wholesalers, and fewer borrowers too.    The industry adopting change today could be an easier than attempts in the past.

The above is telling me is that if the opportunities for “flipping” loans for price, prior to closing (whether it benefits the customer or just the loan officer) are diminishing.  There is a lot more “coordination” (intentional or not) that needs to be implemented by the buyers of loans but I see this as a good thing.  This will put competition on a more level playing field, will weed out pricing at 0$ in hopes of making money on a relock and will cut down on borrowers applying with multiple lenders.

Have a solution to this issue as either an investor or lender?  We’d encourage you to post it below.

P.S.  We did start our own secondary department last year in order to bring the risk/reward of a hedged pipeline in house.  Still learning how to do this correctly but we have outsourced our hedging intelligence to John Ohman and Flatirons.  Flatirons is a good option for those of your wanting to get into this method of delivery without hiring a full time secondary department.