Lender unveils 'Lock & Shop' product amid market volatility

It comes in response to unpredictable rate environment

Lender unveils 'Lock & Shop' product amid market volatility

As would-be homeowners delay buying houses amid a volatile rate climate, Pennymac has rolled out a product in response to the mercurial market – Lock & Shop, enabling buyers to freeze mortgage rates while they continue to shop.

Using Lock & Shop, buyers can choose among three lock terms: The 60- 75- and 90-day lock, giving customers 30, 45 and 60 days to shop, respectively. Pennymac bills itself as the number one home purchase lender in the US. Mortgage Professional America spoke to Scott Bridges, senior managing director, consumer direct lending, to learn more about what prompted the product rollout.

“We took note of the market,” Bridges said succinctly during an interview with MPA. “Rates are continuing to rise, and the Fed is indicating it will continue to raise rates. So, we developed a Lock & Shop product where you can lock in your rates today for up to 90 days while you shop for a home, and that will lock at today’s price. So if the market sells off at any level over the next few months, your price is protected.”

The product was developed specifically in response to the volatile market, he said, and was meant to mitigate the stress of navigating the uncertain mortgage landscape. “It really insulates you from interest rates and preserves your buying capability,” Bridges said. “If you qualify for a $500,000 loan today, with a Lock & Shop loan, you’ll still qualify for it for 45, 60, 90 days. We feel it’s a very competitive value-add for the consumer. Having insulation from a really unpredictable market is a great thing, and especially now as people are out getting preapproved and making offers. It’s not the easiest market to navigate to begin with, so we thought this would add a very nice peace-of-mind component to the buying process.”

A minor caveat: Lock & Shop usage is contingent on preapproval, Bridges said. Also: Jumbo loans don’t qualify for Lock & Shop: “We do require people get preapproved first. That’s to ensure they qualify for the amount they want to buy. We make sure they qualify and then they can have a Lock & Shop product for up to 90 days. If you get preapproved, we also knock off 50 basis points – half a point off your fees. So, if you have a $400,000 loan and you preapproved with Pennymac, you would save $2,000 dollars in closing costs.”

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In tandem with the Lock & Shop product, Pennymac is also offering a special homebuying savings program that can provide customers with up to $5,000 in savings on a new home loan. Bridges expounded on the offer: “Separately, if you don’t have a realtor, and you choose one of the realtors in our network, effectively the realtor works for a discounted commission and shares those savings with the consumer. It’s a great offering.”

Bridges said both products were launched about a month ago. “And we’ve had a lot of people hand-raising to enter into our Home Connect platform that allows them that reward,” he said. “Once they close the transaction, they receive that reward post-closing.” There are a handful of states that don’t allow the reward to be paid to the consumer, he noted – Alaska, Iowa, Louisiana, and Missouri.

Often in these times of pandemic – the more optimistic would term as post-pandemic – and unpredictable market shifts, products are rolled out in the mortgage space that actually had their development genesis before such forces emerged. Bridges said the Lock & Shop product – officially released on June 20 – was developed in direct response to the current volatility.

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“It really was a response to the times, combined with the fact we’re very purchase-focused,” he said. “Rate and term refinancing is largely gone from the marketplace. There’s not a lot of rate and term refinancing going on right now. With the focus on purchase, it’s incumbent on us to come up with a competitive, value-added product for our customers. We spent a lot of time developing it, and we’re very happy to release it.”

The increasing demand for the nascent product yields evidence of its need among many consumers amid the mercurial market, he suggested. “It’s been very popular with our customers,” he said. “We’ve seen an escalating growth of Lock & Shop applications with each passing day. It has gone up fairly dramatically from our release date until now. We’ve seen it growing every single day.”