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September 23, 2011

What happens when rates get SO LOW? “You snooze you lose”

by billthemortgageguy

When rates get so low  a MAD RUSH storms the industry and causes a shock treatment for lenders and things get shaky.. WHY?   People see rates SO LOW trying to get the savings and wanting it NOW!!   The best way to explain it would be like Black Friday..

The only difference is instead of selling out of the products banks “purposely” increase their rates even if the markets are saying the exact opposite?  Lenders just don’t have the capacity at times to handle the business, so they do this to create an even flow and calm things down internally,   If banks get TOO busy they can’t close loans, forced to pay for extensions on the already locked rate creating pull through issues(locking a rate and letting the rate go back to float status) ..A state of internal corruption and confusion which not only affects their reputation,  but they lose money in the process, literally..

In 2008  One of our lender’s lost $1 million in “two” consecutive months because of these sharp drops. A time when all signs pointed to revenue.  Since then many lenders have taken preventive measures to gauge the business and their capacity.  This is a hard pill to swallow because you know the rates should be lower but because of volume levels the true rates aren’t there.. 2008 was my first experience of the this phenomenon, and once again I am having flashbacks after sitting on the phone waiting for one of my lenders to answer as if no one was home.. I noticed their pricing immediately got worse when the market didn’t reflect the change. All this to say is if rates are LOW, don’t  fall asleep at the wheel. Take advantage of this opportunity to save if you can.   Feel free to call with questions: 630-330-5626


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