Refinance Process Affects Mortgage Broker Too

Added January 19, 2009 by Ilyce R. Glink

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Summary: What responsibility does a mortgage broker have to notify his clients when they can get a better interest rate on their mortgage loans? Pulling files from lenders may leave the mortgage broker with a poor broker file delivery rating. Some mortgage brokers believe that mortgage loan borrowers also bear some responsibility in finding the best home loan -- that they should not rely entirely on the mortgage broker.

Q: I read your article in the Oregonian titled "If your broker won't lower your rate, find a new broker."

My husband and I run a small brokerage in Portland. While we always try to get the best deal for our clients, they too have some responsibility when it comes to locking in a rate.

Pulling files from lenders after locking them damages the broker's file delivery rating with the lender. Doing so too frequently will result in termination of the brokerage agreement with that lender.

Ultimately that leads to higher costs for the consumer. Educating the customer at the front end about locking is very important. If there is a dramatic drop in rates we will consider moving the file, but it is not appropriate to do so every time the rates move 0.25 percent.

Your article leads the consumer to believe that it is perfectly appropriate for them to demand the lowest rate at any time after locking, regardless of the amount of the drop. If that were to become a pattern, I guarantee you will see lenders eliminate the lock option entirely, or begin charging handsomely for locks.

You should be clearer before setting that completely unrealistic expectation.

Mortgage Brokers Should Notify Borrowers To Keep Them As Clients

A: When rates drop significantly, it's well publicized. Everyone knew about it. Would you rather your borrowers went elsewhere and you lose them entirely or should they call you first to see if there is anything you can do? The point of my suggestion is that the borrowers should call back their mortgage brokers first and attempt to work something out.

While I understand the plight of the mortgage brokers, it's unrealistic to think that someone is going to accept an interest rate that is half a point or three-quarters of a point or even a quarter point higher than the going rate simply because they have locked the loan.

Loans can be unlocked. Some lenders offer float-down options, and with a refinance, the borrower still has a 3-day right of rescission when refinancing a primary residence. So, the borrower could legally close on the loan and then withdraw three days later. I'm sure that is a far worse option than the borrower going back to the lender before the loan has closed to ask for help.

While a lock should be well thought out ahead of time, market conditions are volatile, to say the least. I can't in good conscience tell a borrower "Too bad, you locked the loan" when there are other options to explore first.

Mortgage brokers should get out ahead of the curve and look for ways to keep borrowers. Even if you can't do anything, you'll score customer service points by calling the borrower before he or she calls you and laying out what options they do have.

Jan. 19, 2009.

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