Mortgage Brokers/Bankers of EF: Are Rate Locks a Ripoff?

[bran987]

Do rate locks usually work out in favor of the lender or the buyer?

I know it depends on the actual market, but do lenders price them such that there is a low chance buying the lock will actually do much to protect an offset caused by an interest rate increase?

Or are they priced such that the cost of the lock actually outweighs the extra interest that would be incurred from another 1/4 pt. move etc.

Always been curious, thanks!

 

[calveless wonder]

Do rate locks usually work out in favor of the lender or the buyer?

I know it depends on the actual market, but do lenders price them such that there is a low chance buying the lock will actually do much to protect an offset caused by an interest rate increase?

Or are they priced such that the cost of the lock actually outweighs the extra interest that would be incurred from another 1/4 pt. move etc.

Always been curious, thanks!

It's not a big difference really.......That's not where the banks make their money but they do make sure their margins are in order (i.e. if they know rates are on the rise, they lock might be a little more expensive to offset the cost).

The reason moreso for locks is that rebate pricing to the broker changes alot more dramatically by the day than do the rates themselves.

Rebate pricing is everything on the A paper side(which is the only place rate locks exist)...since most A paper borrowers give you hell over closing costs and you can't charge a whole lot on the front.


That's why i love subprime
people are fucked up and you can put them in their place. They can't walk into any bank and get a loan

 

[bran987]

It's not a big difference really.......That's not where the banks make their money but they do make sure their margins are in order (i.e. if they know rates are on the rise, they lock might be a little more expensive to offset the cost).

The reason moreso for locks is that rebate pricing to the broker changes alot more dramatically by the day than do the rates themselves.

Rebate pricing is everything on the A paper side(which is the only place rate locks exist)...since most A paper borrowers give you hell over closing costs and you can't charge a whole lot on the front.


That's why i love subprime
people are fucked up and you can put them in their place. They can't walk into any bank and get a loan

can you walk me through an example of a rebate pricing change on the A paper side? I'm not familiar with that terminology.

 

[al420]

Say rates today are 6.5% on a 30yr fixed loan. The rebate or Yeild Spread Premium (YSP) may be .375% . TOmorrow the rate may still be 6.5% but the YSP may have dropped to .125%. Meaning the broker receives .125% of the loan ammount for taking the loan to the particular lender.

 

[lostinfitness]

Say rates today are 6.5% on a 30yr fixed loan. The rebate or Yeild Spread Premium (YSP) may be .375% . TOmorrow the rate may still be 6.5% but the YSP may have dropped to .125%. Meaning the broker receives .125% of the loan ammount for taking the loan to the particular lender.

.0125 if doing the calculation on a calculator.

 

[robspmc]

Not to call bullshit or anything but I'm an AE for a subprime lender (top 5 quarterly by volume) and we have standard 30 day locks but we also have up to a 180 day lock option. Is it worth it? Depends on how it's priced and what the market does. One has to have all variables to the equation before the can give you a correct answer?

 

[lostinfitness]

Not to call bullshit or anything but I'm an AE for a subprime lender (top 5 quarterly by volume) and we have standard 30 day locks but we also have up to a 180 day lock option. Is it worth it? Depends on how it's priced and what the market does. One has to have all variables to the equation before the can give you a correct answer?

Are you really an AE for a subprime lender? If you were you would know that B/C companies don't do rate locks. I have been in the industry and an industry top for the last 5 years. I don't want to put you on front street there bro but don't talk about things when you don't have the knowledge to speak with.

good luck

LOST

 

[robspmc]

Are you really an AE for a subprime lender? If you were you would know that B/C companies don't do rate locks. I have been in the industry and an industry top for the last 5 years. I don't want to put you on front street there bro but don't talk about things when you don't have the knowledge to speak with.

good luck

LOST

Hey Lost,

I don't want to get into a pissing contest and bore you with a credibility statement. However, I am an AE and I can assure you that we do lock rates. I have an internal person that does nothing more than imput rate locks from my brokers with secondary. I will agree that this isn't the norm for subprime but we do. Being in the business as long as you have I'm sure you could use your resources and search out an extended subprime lock. Remember, just because you don't know about something doesn't mean it dosen't exist. I wouldn't be to suprised with much these days, just look how much the market, companies, & products have changed in the last year. 5 years ago (heck 2 years ago) who would of thought you could get a stated 80/20 combo (50 year 1st and a 40 year second) with a 640 fico? The time they are a changin.

 

[lostinfitness]

I agree, after I made that statement I only thought of one bank which could lock rates. IMSB. What territory do you have?

 

[robspmc]

I agree, after I made that statement I only thought of one bank which could lock rates. IMSB. What territory do you have?

There's at least one more out there. PM sent.

Have a great day,
robspmc