It happens. Borrowers shop rates and sometimes they find a “better deal.” It doesn’t always matter that you provide better services or faster closings. Some borrowers only see the difference in the numbers. When this happens, do you lower your rates and fees to match the competition's offer? Or, do you stay firm and risk the deal walking away?
If you lower your rates or fees, your firm most likely has a formal process to request a rate or fee concession on the loan. But since current loan originator compensation rules don’t permit reducing the LOs commission to keep the deal, the secondary marketing lock desk plays a central role in protecting and maximizing profitability. And in today’s competitive market, mortgage lenders are under more pressure than ever to make fast, accurate decisions on interest rate and fee concession requests.
The lock desk’s job is to make shrewd business decisions that keep a lender’s book of business in line with investor guidelines and the pricing model and margins set by management. But an ill-informed decision on rate or fee concessions can have negative consequences, whether that’s approving a loan that’s not profitable or losing a loan to a competitor when it could have stayed in house.
The problem here is an age-old one: decisions are only as good as the data that drives them. The decision to approve a lower rate or a lender paid fee should be an exact science, but too often there’s a fudge factor involved in estimating total loan expenses — especially when it comes to compensation.
At the time of lock request, lenders frequently use an estimated basis points (BPS) calculation to estimate LO compensation for every loan. But we know from our experience calculating more than $2 billion in compensation for some of the nation’s top mortgage lenders that LO comp is nuanced. Does your estimate take any of these common LO comp variables into account?
- Commission tiers and where the individual LO is expected to finish the month
- Overrides for managers?
- Operational bonuses for processors, underwriters and closers?
If you’re like most lenders, your lock desk doesn’t factor these elements into expected loan expenses. Instead, they use a rough estimate — and rough estimates lead to inaccurate decision-making. If your lock desk DOES factor in these elements, how are they keeping compensation data points accurate and up-to-date — and at what cost?
Given the level of competition in today’s primary and secondary markets, the importance of sound decision-making can’t be overstated. Consumers want the cheapest loan possible, loan originators want to close deals, and managers want to protect both market share and margin.
As the final arbiters in determining whether loans meet the pricing model and margins set by management, the secondary lock desk wields a lot of power — and shoulders a lot of responsibility. With CompenSafe, they can make better-informed decisions without adding time or effort to the concession’s workflow. Just ask us how.