Integrity & Pikes Peak,
It is very apparent you know very little about interest rates.
And it's very apparent that your reading comprehension is somewhere near grade school (I didn't start with the not-so-flattering commentary this time). I'm going to repeat, for the third time I believe, that this is not about interest rates, this is about when not to lock, especially if you are fairly certain that the closing won't happen when your buyer thinks it's going to happen. Keep in mind that that there is a period of when it's not-so-safe to lock, and that's a different issue of "maybe it won't close on the closing date - for tight closing dates." Your buyer's lender could care less when it closes -- the lender gets:
1. a committment
2. a fee for rate extension (assuming no float)
The lender has no motivation to look out for the buyer in that regard, so the lender will always be in a BIG HURRY to get a commitment from the buyer.
If a buyer took your advice in May through July they should be seeking legal counsel. The MBS market increased over 100bps. (Google Black Wed. in the MBS Market) That means an increase of .75-1.25 in rates. If you had your buyer waiting on the "due diligence period" to lock, you just cost your buyer thousands of dollars in interest.
Uh huh...shoulda, coulda, woulda...Sounds like you're pretty quick to seek legal counsel. Way to go on setting the bar and expectations for those who may read what you've got to say. We can "what if" this all day long but we are talking about what is likely, what is known about the real estate transaction, and to ADVISE the buyer with such information VS SAYING NOTHING.
Might I suggest a class on simple economics?
Before approaching your podium, might I suggest you reread my posts?
It is very important to understand the MBS market if you are going to advise a client on rate locks.
Do I need to know much about inertia and crash test dummies to advise someone to put on their seat belt? With your logic, if I did so and a friend plunged his car into a lake and was unable to release the belt and drowned, you'd suggest legal counsel for his family to sue me for wrongful death. Good job, professor NAR.
If you equate ones having to know the MBS market to the "Price of tea in China" then I shall borrow a phrase my favorite college professor "You cannot argue with stupid".
Hey, I'm King of smart remarks around here. :-) No, the equation was apparently beyond your comprehension, professor NAR. I didn't equate the "Price of tea in China" to the MBS market - the mentioning of the "Price of tea in China" simply denotes an irrelevant topic. The MBS market has nothing to do with advising your buyer to not lock when you have much good reason for him to wait until you believe the deal is doable within a given time frame.
If the purchase contract says 30 days, might I suggest you perform your due diligence in ensuring that closing date can be met before you permit your buyer to agree to the terms.
EXACTLY. What just happened? Did you just get it and couldn't figure out where the backspace key was? So lets break down what "ensuring" means. For tight closings, I can't ensure the home inspection won't turn up something that will cause the buyer to terminate the contract (not unusual), I can't ensure the FHA appraiser won't have a problem with appraising (no comps within the past year so he's got to go outside of the neighborhood to get them), I can't ensure what the seller will agree to fixing after the inspection report is in. So why not advise the buyer to wait until the dust settles?
If you anticipate needed extensions, negotiate upfront who shall pay for any rate lock extensions.
Ok, there's a good suggestion.
Here are some terms you might need to learn:
Rate Lock Extension
Re-Lock Negotiation
Rate Lock Float Down
And here are some terms for you. There will be a pop quiz tomorrow:
Fiduciary duty
Reasonable
If you were my agent and advised me not to lock and rates increased as they did from May through July I would demand you forfeit your commission to cover the interest you have now cost me on my loan.
And I would think to myself, "Has this economic genius ever gazed upon an amortization schedule? My average commission wouldn't cover the difference in interest for the first 24 months of a 30 year note. I wonder if his favorite college professor was a mathematician and was speaking *to* him with his phraseologies?"
If you were my customer, and I were doing a listing presentation for you, I'd spot your litigious behind a mile away and would tell you and your legal counsel to hit the road. I'm only looking out for my buyer - he makes his own decisions but I advise him of what is likely to happen.
I want to give you credit for at least mentioning WHY you wouldn't advise to wait on the lock based on the likelihood that the closing date may get moved. So you went that route out of *fear* that you may lose money on the deal (get sued) for looking out for your buyer.
Previous Topic
Index
