I am happy when lenders proactively stop working with bad mortgage broker clients. One common practice that I find annoying is when an originator doesn’t deliver a loan once it has been locked with a lender. It’s not uncommon to hear that some originators regularly break a lock if rates improve. Oftentimes they do this to pocket additional yield spread and give the customer the same originally promised rate.
The problem with this practice is that it costs the lender money every time a mortgage originator doesn’t deliver a promised loan. This cost ultimately gets passed onto everybody else in the form of increased rates.
It is nice to see that some lenders are now cutting these originators off from their source of funds and helping the good originators as a result. I applaud the efforts of Provident Funding. Let the originators that manipulate loopholes on a regular basis go work with lenders that will put up with it. The J. Berman Group customers shouldn’t have to pay more because others try to beat the system for their own benefit.
Here is the explanation from Provident.
Controlling our costs is a major factor enabling Provident Funding to remain “the industry price leader”. When we commit a fixed price to you for a specific time period, we must honor that price. We take interest rate risk to guarantee to you a price we may not be able to secure in the market when we sell your loan. Managing that risk can be costly if an account fails to keep their commitment to close the loan with us.
Logically then, Provident Funding places a great deal of importance on closing every locked loan within the agreed upon time period so we monitor our accounts locked fallout.
Fallout = loans that an account locks and subsequently does not fund with us.
Effective immediately Provident Funding is terminating all Tier 3 accounts in accordance with our philosophy and agreement with you.