Ask the Expert: Can I prep for rapid rate changes?

by MPA16 Dec 2014
By Dave Hershman
Special to MPA

Rates went down so fast in October and I was unprepared. I had a big pipeline of locked loans. What should I have done to prevent the massive requests for renegotiations?
Many Loan Officers Have Written

First, recognize that there is a risk of locking and you are experiencing that risk. We sometimes advise clients to lock because it is safer, but the risks run in both directions. It is our job to advise on risks, but not to make the decision. What you need to do is to educate your clients that when they lock, they lose the option to lock in rates if they go lower.

However, all the education in the world is not going to prevent some of your clients from calling and demanding a lower rate when there is a big movement. One thing I always advise is assure them that you will inquire and get back to them but it may take a few days. That way if there is "whip-lash" and rates move right back up--you are not causing your secondary department or investors to take losses for no reason. This actually happened in mid-October, a quick dip with a bounce-back.

Plus the closer to settlement, the less the flexibility the borrower has on purchases. You want to go to bat for them, but you want to do this only once. Going to bat may mean begging and pleading, of course. (A little humor)

When rates move down very fast, secondary departments know they may lose their pipeline and many will be flexible---to a point. The better job you do of protecting secondary every day with lower fallout rates and fewer renegotiations during normal times, the better chance you have of getting favors during a crisis because you will have built-up what used to be known as “green stamps.”  Actually Covey calls it an “emotional bank account.”   

Do you have a reaction to this commentary or another question you would like answered? Email Dave at
Dave Hershman has been the leading author and a top speaker for the industry for decades with six books authored and hundreds of articles published.   His website is  If you have a reaction to this commentary or another question you would like answered in this column? Email Dave directly at   


Should CFPB have more supervision over credit agencies?