No Warning

Higher Interest RatesAs a broker, most lenders give you a heads up before they raise rates. It’s a professional courtesy, and an important one.

Advanced notice of rate changes helps brokers avoid disappointing clients. One of the worst feelings you can have as a broker is having to tell someone that the rate you quoted them, the rate they got excited about, is no longer available. It’s destructive to relationships because clients, even if only subconsciously, wonder if you’re pulling the wool over their eyes to sell them a higher rate.

It’s just as frustrating for the broker. You expend efforts to explain the product and set your client’s expectations, collect all the lender’s required documentation and prepare the file for submission to the underwriter, only to be told, out of the blue, that the lender has raised its pricing.

If they chose to, all lenders and/or funders could easily avoid the ill will created by sudden rate increases. It’s not like the lender (and/or the funder in the case of lenders who sell to institutions) suddenly realizes that spreads are too tight, literally a few minutes before they advise their brokers.

Most of the time:

  • funding cost changes can be anticipated with some degree of foreknowledge
  • lenders and/or funders know when they’re approaching volume targets.

At the very least, they could provide two business hours’ notice to their loyal partners (brokers), who could then warn clients accordingly.

Of course, one could argue that brokers should always get deals in promptly to lessen the odds of rate hikes. But prudent brokers often try to round up key documents before submission, and sometimes (through no fault of their own) that process takes a little longer than expected. Advising a client of an impending rate change creates urgency and speeds up that process, which is exactly why warning is so valuable.

Lenders who suddenly hike rates make you truly appreciate lenders who consistently alert their brokers beforehand. Advanced warning is all the more important when the rate in question is a marquis promotion, where brokers have multiple deals in their queues waiting to be submitted.

Many in business believe in the power of negative subconscious impressions. That refers to when people won’t do business with you solely because of negative feelings from the past—yet, they can’t quite remember why they feel that way. They just sense that you weren’t on their side in a previous dealing.

The same concept applies to lenders. Other things equal, a broker will always send a deal to the lender who created the fewest headaches for them in the past. And in our world, unannounced rate hikes are one big cluster headache.

  1. Very timely post at a point when VRM discounts are unexpectedly shrinking. The truth is that to have any sort of rational customer service we need 2 days notice of a rate hike. Frankly some lenders give that sort of notice and everything works out very smoothly. Conversely if a lender emails a note at 6:00 pm in the evening that rates just changed at 6:00 pm that night I guess we are screwed in our dealings with our applicants.

    Rob cited the compelling point that many lenders want to see various client docs up front prior to issuing a commitment so how the heck can we suggest a rate to a client, ask them for all their documents and then the next day when they send the documents tell them the rate is gone. Our lending partners should appreciate that there is a bridge of good faith that brokers must extend to their clients and when a zero-notice rate spike destroys that good faith we may have lost a great client to our bank competitors for the life of the client because let’s face it, the branches always have a means to back date applications a couple of days.

  2. Why not prequalify your clients to avoid missing out on a good rate before a change? Some of our good lender reps WILL give us a call or an email with the heads-up that rates are about to change, with a few hours notice or even a day.

    1. Hey Adam, Pre-qualifying a borrower doesn’t hold the rate. To protect efficiencies, many brokers like to have all their ducks in a row (including but not limited to documentation, and certain details that a deal may be contingent on) before submitting an app. You can’t secure a rate until you submit the app. That’s the issue.

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