Rate Index Methodology
Due to the proprietary methodology and the volume of correspondence we receive, we are unable to respond to questions about the rate survey. The following list attempts to answer the most common questions over the years. If your question is not addressed, you can make a suggestion for an update, but please read the whole list first.
- Most important point: the best use of this index is to track the CHANGE from day to day. There are so many things that can cause discrepancies between borrowers, lenders, and quotes. But because we use the same baseline scenario year after year, you can be sure that the CHANGE is a good representation of how rates are moving.
- The source data is actual rate offerings from a variety of lenders including wholesale, correspondent, and retail.
- The index is generally updated once per day unless multiple lenders have changed rates during the day.
- A "top tier" scenario is used as a baseline (75LTV, 760FICO, etc).
- We use proprietary methodology to adjust the rate to account for points. That can mean that lenders are quoting 6.125 with points while our index is at 6.25, hypothetically.
- We generally disregard the "loss leader" mentality among certain lenders (i.e. quotes of 5.5% in the marketplace have little to no effect on the index if the average lender is at 6.25%). Conversely, we also disregard lenders who are obviously out of the market on the high side.
- Originator compensation is irrelevant to this index. It is intended to capture the average lender's top tier conforming, conventional 30yr fixed rate quote, adjusted for the prevalence of upfront points (in cases where they actually make sense). One can safely assume that the average lender rate quote is generating compensation for the originator.
- If you are a lender and your rate is significantly higher than our index, you are either out of the market or you are not comparing apples to apples (again, that's 75 LTV / 760 FICO and no other agency LLPAs)