I don't know if the professionals here would like this question or attitude, but I need to ask from my point of view.

I just locked on Sunday.  Based on the website of our lender, rates have dropped 1/2% for the same pts.  This is approaching the point where I could probably skip out on my loan and deposit and get a new lender with a better rate/points.  Obviously I wouldn't recoup all of my costs...that would be impossible to do, however, I think I could get a better rate without paying a dime more plus leave myself the ability to float down.

Given these situation, is it unheard of for an applicant to try and negotiate with a lender in this case.  Could I say, I need you to do a little better, or it may pay me to start over with a new lender.  We are building and have about 3 mos until completion, so time shouldn't be an issue.  It makes me feel like a real a$$, however, I think it is using the system in a perfectly acceptable way.  If this kind of out is there, why not use it.

Thanks for your help.

Ask your account executive to request a relock at no charge. Let them know that rates have dropped to the point where it is an injustice to your borrower to proceed and you have a responsibility not to damage your client financially. Let them also know that your client knows current rates and is ready to walk out on both you AND the lender to get the loan they deserve.

Usually you can get a good response to this, because it is better to keep the customer than to let them leave. AEs hate it when you nickel-and-dime them for an extra hundred dollars, but in this case your client is being harmed financially.

If they won't do it, then go up the chain and ask, but give them only one more chance. Your other options are to suck it up and pay the relock charge (In which case the client will probably not get the full 1/2 reduction from you) or accept it as justifiable fallout and take the loan elsewhere.

One thing is for sure, you will find out if your AE is really willing to work with you in the best interests of both you and the customer. I have had AEs perfectly willing to do this for me with no hassle. What they really don't like is if you pull out and don't even give them a chance.

Actually I am the borrower, but based on your  information this is definitely something I could try.

Any other thoughts...

this is a tough topic...it really is...and I commend you for admitting feeling like an a** b/c we hate dealing with this in the industry...

the whole idea of a lock is to lock it...for it to not change...and then people turn right around think it should change despite the lock...of course, if rates go up, then they're happy as a clam and it's not like the lender can say that they're going to charge you a higher rate...

ask about a float down...you usually have to select that up front though...ask about a rate renegotiation...usually you can't do that until the final few weeks before you close...

crunch some numbers and see where you can not find it financially feasible to continue with the current lender...odds are that over the course of the next 3 months rates will be this low or possible even lower again...so ask yourself realistically what you will be satisfied with...otherwise you can jump ship, lock in with lender B, and find yourself in the same predicament a week later...

With my clients, I show them the all time low (from last couple months) to put things in perspective and how far off we currently are from that...it shows you realistically how low is possible as when things are good, the question is always how low can they go...and then I ask them is it worth the risk to try to get the all time low or just lock it in and not worry about it based on the numbers...

on loan amounts of $100k-$200k, you'll see that there's not a world of difference with a .25% rate difference.... .5% rate difference is a bit of a different story though...

Jon,

I get yelled at everytime I say this, but.. you're the one who ends up making the payments and it's in your interest to negotiate with your lender and if they can't do anything then move to a new lender.  We would all like borrowers to never question a lock once it's done but that's a fairy tale. A move in rate by .50% is absolutely a reason to inquire. If you were looking for the next 1/8th I'd disagree but 1/2 is to much to eat it in principal.

Do what's right for your family and the loan officer will have a story to complain about around the water cooler.

This is one issue that Clem and I disagree on to a certain extent. 

I agree that you should check with your lender to see if there is a float down/renegotiation policy that you can take advantage of.  If you can float down the rest of my post is mute.

To me, the issue is a matter of principle.  The rate lock agreement is designed to protect you from rising rates.  The agreement is a contract.  While I certainly understand that a much better option is available to you through another lender, the time for shopping for programs is BEFORE you lock a rate.

The two examples that I use are: 1. How would you feel if you locked the rate, they went up .5%, and the lender said I am sorry but since we have other customers willing to pay .5% more, we are just not going to do you loan.  2. What if you entered into a contract to buy a home and a few days later an identical home 3 doors down went on the market for $50,000 less.  Would you expect to be able to get out of the original contract?

Customers hate it when a loan officer promises something and then doesn't deliver.  Then some customers do the same to us by signing a rate lock and then deciding that it wasn't the best deal that they could get. 

Lock fallout can cause brokers to lose lenders and that may eliminate our ability to offer the best rates.

Finally, check on your state laws.  In MN, a customer is not allowed to have more than one rate lock and it is against the law for an originator to entice a person to break a rate law agreement.

Thank you all for the advice.  I again do feel like an a$$.  I liken myself to a professional athlete with a 5 yr contract that wants to renegotiate after 2 years.  That being said, however, the rules of the game allow this kind of out for people when rates drop enough, so I feel I should take advantage if it is a financial benefit.

My lender told me that he could approach his manager about us possibly using our float down early.  I didn't get an indication that they would consider just renegotiating rate/fees, but I didn't really play hardball either.  I just asked him to email me opening rates today, as I don't want him to ask until I know I'll use it.  I don't want to play games with them, but I need to keep my position strong.  I think if I get to a point where I could realistically leave and do better (and I can do this because we are new construction and do have time on our side right now) even dumping my 1% deposit and app fee, I would not just ask to use the float down, but also have another one at the 30 day mark.  This would protect me from further drops.

I totally agree with the 1/2%, even 3/8% mark being an adventageous time to take advantage.  I'm financing around $330K, so it works out 1/2% is about $75-$100/mo.  Nothing to sneeze at.

I wouldn't jump ship just yet.  I think the concensus is that rates will remain low for some time.  You might want to just hold out and watch the market until your float down becomes an option.

Kent -

I appreciate your input!  I didn't see your post before I responded here.

I agree this is a principle and obviously my thinking here is parting ways with the principles that I do have.  That is why I do have a level of discomfort thinking about this.  At the same time, I am trying to do what I can to benefit my family.

I agree the rate lock agreement is a contract, but it clearly reads that no final performance is needed on my end.  If I so choose I could withdraw my application if I want and eat my deposit and app fee - allowing me to use someone else's services.  Is that right, no, probably not.  But it is a reality.  In my opinion, while I may be an a$$ for using this to my advantage, I also feel that I am being fair by giving the lender an opportunity to work with me.  I could just pick up and leave if the cost benefit becomes a positive for me, and not give them any chance.

Like I said before, this kind of thing happens in different ways all the time.  Atheletes renegotiate.  People go back to stores to get better sale prices.  I'm sure in the right situation, home buyers that maybe find a property going lower that affects their contract use their "outs" to negotiate a better deal or get out of a contract all together.

In the end I guess it all depends on the person, and where they are sitting.  From your side of the table, I understand this wouldn't make you happy.  From my side, I almost feel like I'd not be doing my job if I didn't explore my options.

I've never heard of anyone losing their deposit...it's typically just the app fee...the deposit is your down payment funds...it is the builder's lender, so I could be wrong, but I've never heard of that...

It's probably a construction deposit for the long term rate lock. Which is another reason why I don't feel for this lender if he goes elsewhere. They keep the 1% and that's going to cover any lost lock.

Kent, I'm not aware of any other state except yours that ties the borrower to a lock. The rest of the states deal with this situation everyday and it makes us even more responsible for knowing where rates are going and keeping educated to stay professional and lessen the lost locks.

Side note,

If you can float down now and again 30 days before closing I would float down without a 2nd thought.

Clem-

You are correct.  We have a long term lock, so we were required to deposit 1% with the lender plus our app fee.  This is approx $3600.  If we'd jump ship with them we would forfeit that money.

What I'd like to do is wait and see if rates do actually get good enough that I could get the same rate I have now w/ no points.  This would allow me to actively pursue other lenders, and maybe maximize my bargaining power with my current lender.  If I could walk away at a financial benefit and go with a new lender, I would ask the current lender to allow me to float down now (and I'd pay the float down rate) and then ask to keep my 30 day float down option as well.  As if I left them, it is essentially what I'd be getting anyway.

Hi Jon. As a Consumer, I want the best deal. But as Lender it does stink when a client chooses to Lock and then wants to renegotiate. It's not as easy as these guys make it sound to just "renegotiate" depending on what kind of Lender you are dealing with. It actualy costs money for a Lender to lock a loan. There are about 5 people who have to touch that file to get a loan locked. The Loan Officer who inputs the lock, then the person at the lock desk who accepts the lock and does the data entry, the person at the Lenders money warehouse line who then does their data entry to reserve the funds, the Banker who then has to account for that money......etc etc. That's just to lock a loan. About 20 people touch a file to close it.

This is part of the reason why it "cost" a Lender over $2000 just to close a file,...accounting from everything to personnel to keeping the printer full of paper to print your loan docs.

Do what you think is right. I can't blame you for wanting the best deal. At least you are not just bailing on your LO. You're giving them a chance to "try" and figure something out.

Clem Borkowski:

Kent, I'm not aware of any other state except yours that ties the borrower to a lock. The rest of the states deal with this situation everyday and it makes us even more responsible for knowing where rates are going and keeping educated to stay professional and lessen the lost locks.

Trust me, I still stay on top of this for my customers who have the option of renegotiation.  I find it is a value added service and helps with referrals and retention.  Even though currently I only have the ability to do MN loans, I have worked several other states and also do not know of any with the protections that our state provides originators on rate locks.

I also am approaching this subject from the standpoint that the customer was aware of the options or lack of options for a float down provided by the lender chosen by the broker.  If the borrower's choice was made on that basis, I stand by my opinion.  If the broker chooses to quote a rate with an aggressive lender that does not allow a float down option and has the borrower enter into a rate lock; that is somewhat of a different story.

I go to great lengths to educate my customers and make them aware of both the benefits and the drawbacks of my most aggressive lender.  I do not want to lose that lender due to lock fall out and I know that my customers respect that. 

Absolutely, I wasn't saying you didn't just that your state has taken an aggressive stance on the issue and because of that the mindset up there for youin Minnesooooota is a little different than the rest of us.  But we're all on the same page. Education is the key, unfortunately many brokers aren't doing enough education with the client in selecting the lender for their needs.  With the right information most clients make the right choices.

Clem Borkowski:

because of that the mindset up there for youin Minnesooooota is a little different than the rest of us

Ya you betcha now.

Kent you spend to much time on here. I know you're in central time so get off all ready. I was feeling like I'm addicted at 8:30, 9:30 is just ridiculous. LOL

I do this as my wife watches tv... I can multitask that way.

That's funny, it's exactly what I'm doing. Mines watching the greys anatomy/private practice cross over shows.

Same here... it's over now tho...