We had a borrower lock in a Jumbo refi on Tuesday and then yesterday when rates fell, he insisted that our investor give him a lower rate. If rates had increased, however, I am certain he would not have insisted that our investor give him a higher rate.

Briefly, rate locks cost lenders money b/c they have to hedge those locks or effectively buy a “put option” that ensures they can sell the loan at the locked rate when the loan funds. Borrowers are extremely grateful for this when rates increase, but when rates fall, they seem to forget.

As originators, we feel obligated to honor our locks b/c we know how much such locks cost lenders and investors. If rates do fall significantly, we can and do request “rate roll downs” but those too cost money, and borrowers cannot unfortunately simply roll down to “current market.” This is the case at all lenders.

Jay Voorhees
Founder/Broker | JVM Lending
(855) 855-4491 | DRE# 01524255, NMLS# 335646

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