It's always more difficult for you and for me to say "lock." There's a tendency to think of a lock decision as "costing" you money if prices improve going forward. But you have to consider where you've come from floating up to the current lock decision. There is ALWAYS a reasonable chance that rates will improve even if you're locking. It simply depends on your time frame. If one was going to say "well, I locked, but then rates got better a few weeks later, so I LOST the difference in YSP between now and then..."


If you were keeping tabs on the market last week, you would have seen that we were at the lows on our recent trading range and had a significant amount of supportive fundamental and technical data suggesting floating at that time. Between then and now, you would have benefited around 2.0 YSP. That's an uncommonly good gain from a float decision. So if you had to lock things in last night, don't beat yourself up if today changes course and we end up having some gains. The money to be counted is the additional YSP that you earned from last week to this week and you can't say "shoulda woulda coulda..." going forward.

In other words, the benefit from lock/float decisions should only be calculated/considered based on WHERE YOU'VE COME FROM TO TODAY, but NOT FROM TODAY GOING FORWARD. Overall, if you're making more money or a consumer is saving more interest than you otherwise would have by locking last week, then the market data and analysis has netted you over 2 YSP (more than enough to afford a subscription by the way, if you need more info on subscriptions and what you get with those, email us). You have to consider your loan or your pipeline as if you were a trader who is tasked with earning a higher return than you otherwise would have if you had locked on the day the decision was presented to you. So even if you floated last night, if you first made the decision last week when we were 2YSP lower, you should start out your "how much of a benefit was this?" calculations with 2 points in the plus column, and then subtract any potential losses between now and the time you lock.

There's one other thing to consider too: TIME. How much TIME will it save you to not be agonizing over a lock/float decision? What is the personal benefit to you to be able to "lock and move on to the next deal?" Often times, the eighth to three eighths that you might not be maximizing are better directed in terms of your time towards getting more loans, or simply living a few years longer because you are not tied to MBSLive screen wondering what's going to happen next. Remember! As completely awesome as timely market analysis is (thank you.. thank you...), your JOB--your primary function--is to be out there every day bringing in loans so that you at least have the luxury to make such decisions in the future... Just remember that if you start to get carried away "playing the market..."

It sounds like this is a disclaimer of sorts, but far from it. I just want the previous thoughts to be considered as you decide how aggressively to lock/float. If you want to attain that deeper level of understanding that allows you to form your own lock/float decisions BETTER than anyone could ever advise you, you will end up netting just a little bit more. The only downside to that is that if you're not good at it, your losses can be higher.

I'm pleased to say that the highly opaque crystal ball from yesterday to today was indeed accurate. That's always nicer than saying "well, I locked, but then rates got better the next day." Granted, if you consider the gains last week and the avoidance of loss this AM, you'll have a bit higher number, and don't get me wrong, we're proud and thankful when those sorts of things happen, but if you go back to the original advice, don't worry about what you saved by avoiding worse prices this AM any more than I'd want you to beat yourself up about the decision to float.

All we can do is provide the most accurate and timely live data, educate with analysis and commentary, and guide you to the point of making your own conclusions within the scope of the specific aspects of your situation. All that aside.... We were right about our call yesterday... Ha! (no one will be right all the time, so don't hold me to it! But still.... Who loves ya!?"

Now, all of the above is OUT THE WINDOW AS ANYTHING COULD STILL HAPPEN TODAY! Moreover, there are numerous reasons that anything could happen on Friday. If you are still floating, it could be a VERY wild ride today and tomorrow, so stay closely tuned and account for the risk of losing a large percentage of our gains this morning to AT LEAST the same extent that you are hoping for the eventuality of getting improved rates.

Soap box speech over... Back to work... Just hoping to clarify what we think should be a general "psychological framework" for approaching these decisions.

Currently, we have some big lagging trades coming in from this AM which is causing significant artificial choppiness in the curve. We're vascillating anywhere from a 4-5 tick loss all the way down to a 99-22 (16 tick loss). We're guessing the 4 tick loss trades are laggards that are throwing the data off, and the true range currently is much lower (in the low 99-20's). So if you locked yesterday, you should be on cloud nine right now.

If you did not, DON'T PANIC OR BEAT YOURSELF UP. The more time between now and closing, the more likely it is that you will get all of yesterday's gains back. Plus, if you've floated from last week, you're not so much losing 15 ticks today as much as you are losing 15 ticks after having gained 64 ticks from last week. A 1.5YSP net winner is still quite a big win!