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Fed May Step Back into the Market; Rate Float-Downs

But the question remains, with respect to the Fed stepping back in, why? The Fed’s presence (in buying up mortgages) was necessary in 2009 to maintain demand for mortgages, but, as it stands now, there is ample demand for mortgage-backed securities. In addition, driving rates even lower may not spur further demand for refi’s b/c so few people qualify under today’s stricter underwriting standards. It is these same “stricter standards” that are making mortgages so appealing to investors right now.

Many of our borrowers want the best of both worlds. They want to lock in a low rate now in case rates go up, but they want a lower rate when rates go down. This is frustrating for us and our many lenders b/c “rate locks” cost us and them money. This is why many major lenders charge borrowers an up-front refundable fee when they lock. We do not charge, but we do encourage borrowers to only lock when they are comfortable with the quoted rate.

We like to remind borrowers that when rates are this incredibly low in the first place, rolling a rate down from 4.375% to 4.25% will have only a marginal effect on one’s payment in any case.

Also, rate “Roll Downs” are available with most lenders, but the lenders charge for these roll-downs. So rolling down rates is not as easy as many borrowers believe or hope. Typically, lenders charge us about 1/2 to 5/8 point for a roll down. So this means rates have to improve about 0.25% from the date of a lock to make a “roll down” worth it. And rates rarely drop that much during a 30 day lock period. This can be confusing, so please feel free to contact us for further explanation.

Jay Voorhees
Founder/Broker | JVM Lending
(855) 855-4491 | DRE# 1197176, NMLS# 310167