30 Year Fixed Rate Loan at a Cost of One Point: 4.125%

30 Year Fixed Rate Loan at a Cost of One Point: 4.125%*

Rates climbed after some surprisingly positive “Payroll Numbers” were released; more people were added to payrolls than expected, and the all-too jittery bond market reacted sharply. Also, it is very typical for rates to spike prior to a 3 day holiday weekend. So there is little cause for panic. Rates will likely come back next week.

All loan officers, brokers and lenders at all levels are subject to very hard and fast “Churn Policies”. A “Churn Policy” is a contract provision that holds brokers/loan officers liable for expenses incurred if a recently funded loan pays off within 120 days of funding (some policies are 180 days).

For example, a loan officer might offer a borrower a “No Cost” loan for a $400,000 refinance. The loan officer might get a $7,000 commission or yield premium from the funding lender. The loan officer will use about $3,000 of that to pay all of the borrower’s closing costs, and the loan officer’s company will net $4,000 (the loan officer will likely receive a “split” from that).

If the borrower in the above example refinances again or sells his house within 120 days, the loan officer and/or his employer will be required to pay back the entire $7,000 commission that the funding lender originally paid.

This is very important because we have borrowers who want to refinance right after we close when rates continue to fall, and we also see homeowners who want to sell their house right after they refinance.

*The above rate quote has the following assumptions: $400,000 Loan Amount; 20% down payment; credit score above 740; property is SFR; borrower has sufficient income to qualify; APR is approximately 0.20% higher than quoted rate for a $400,000 loan. Estimated closing costs affecting the APR include $4,595 for Origination and Processing Fees, $850 for other Lender Fees; $1,400 for Escrow Fees, and $1,000 for Prepaid Interest.

Call Jay Voorhees or Heejin Kim at (925) 855-4491

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