Lock Management ideas for Loan Officers in these chaotic times....

Raise your hand if you love waking up to realize you have a lock that just mistakenly expired yesterday. Ugg, it's the worst feeling. The first word out of your mouth is then likely a swearword.

The lock management game has changed a little bit. Processing is chaotic, Lenders are super backed up, pipelines are jammed, and any mistake with a lock could cost a ton of money, or potentially lose you a deal. If this function feels a little loose to you, I would spend some time tightening it up. It’s ok, it’s not just you, it’s happening to very experienced people right now. Chaos requires diligence.

The first big thing to get on the table is this: The Loan Officer owns the lock. If you are a loan officer and you are letting somebody else control your locks, then you need to have an air tight system in place to get this right. It’s ultimately coming back to the LO anyways, so own this.

There's a couple different parts here, so let's start with how to think about locking up front:

1. Know the lenders' turn times and lock policies. There are different types of extensions, and longer lock periods have become mandatory in some cases. Become self-sufficient with lenders, and don't rely on emailing somebody for turn times or lock info every day. Every lender will provide you a source for this information.
2. If you track this yourself on a regular basis you'll have much more confidence. For example, Home Point offers one free extension on every file, 7 or 20 days if the market is worse/better. That’s valuable info, and allows you to lock with 30 day locks knowing you have at least 37 days to deliver. Without knowing this, you may have locked on a 45 day and lost 10-15 bps.
3. Rates are primarily moving due to lender capacity. One of the reasons you have seen rates tick down recently is that lenders are expanding capacity rapidly. What this should mean to you is it’s a little safer to float in this environment then normal. The margins lenders are sitting on are at historical all-time highs. So it would take massive movements in the Treasury markets to move rates higher. And honestly, the Fed wouldn't let that happen at this point. If you have a file that's close to the price you need, make sure you get it in the system asap, so when your lock window opens you can jump on it. Lock windows can be very short…..like 30 minutes short.
4. You need to submit your file to underwriting as fast as possible. If you're going to lock on a 30 day lock but not submit for 5 days, you're not doing it right. This is by far the most controllable time lost in a file…right up front. Make sure you are asking for the right documentation from the borrower right away, insist on getting everything with urgency.

What to do about expiring locks and extensions?

One of the effects of all this industry chaos is a lot of clients are mistakenly allowing locks to expire. Almost all lenders will subject you to worst case pricing plus a fee at that point. If this is happening to you, you need to immediately pause and rethink responsibilities. This is really a fundamental structural issue in your business. Like I said at the top, locks are owned by the loan officers, it is a direct link to your paycheck, you should never have a lock mistakenly expire.

1. Whatever trigger system you're using, this needs to be converted into an action. And there can be no ambiguity about who is responsible for that action.
2. Know the calendar. Quite often you will know before the CD goes out you will not have enough time on the lock. Be proactive.
3. Typically in the mortgage industry the larger the company, the higher propensity they use a centralized lock desk to clean all this up. Even small companies can think about assigning somebody in the office who manages locks with a more sophisticated data management process.
4. There can be a rare situation in which you would let a lock expire intentionally. This would only be because lenders will then allow a new market rate lock after 25-ish days. So if you were delayed for any reason this might be an option as rates continue to get better.
5. One of the issues right now is because the lenders are slammed, no one knows how much time is needed. When this happens, you're just going have to extend for longer than you think, or commit to paying very close attention.…not easy to do with a full pipeline. Not every deal is smooth, and not every deal is going to be maximum profit. Backing up every file to the last day of the lock is super chaotic. I would advise you to avoid this for your mental health ??And my mental health too ??

Thanks Everyone!

Rich Phillips

Almost at $3 billion in career funded volume! Named one of America’s top 100 Wholesale AEs by the Scotsman Guide.

To see some of my archived articles please visit me at www.dhirubhai.net/in/richphillipsAE

Senior Account Executive. Wholesale/Correspondent Lending. Southern California.