Our approach to mortgage lending is simple.  Share the knowledge, education, and experience with our clients, to make them informed clients.  One of the main issues is that most other lenders are either from the large bank mentality or from a call center strategy.  Without disparaging them, the fact that you are here on our website should prove that their relative approaches are not for everyone.

While you can learn more about the costs under the “talk to me about costs” page, this page is going to detail how we offer our clients value, and how to tell true professionals from phone jockeys or bank agents.

Prime mortgages are basically a commodity.  The GSEs (Fannie Mae/Freddie Mac) and FHA are all purchasing the same loans (yours) from the same lenders (Longstreet, Local Bank, National Bank, Online mega lender).  Our approach takes one aspect which is on every loan and breaks it down – This allows our clients to receive the best rate they qualify for.

The aspect we differentiate ourselves on is when and how we lock the interest rate on your loan.  While we certainly did not re-invent the wheel, by applying our knowledge and expertise as a lubricant - we do offer a way to make it turn more efficiently.

This allows us to improve on three important categories:

Better rates.

Faster closings.

Better service.

Better Rates:

We only lock our loans when we are clear to close, or requested by the borrower. 

Locking loans for 30-60 days has many risks associated with it, from a lending perspective:

1. Interest Rate Risk – The risk that the market will move before the loan is closed.  This is a one sided risk, if the rates move too low, the borrower will go elsewhere.
2. Fallout Risk – there is the risk that the borrower will cancel – usually because either they cannot qualify or the interest rate moves down and they must start over with a new lender to receive the new, lower market rate
3. Hedging Risk – The lender makes forward commitments to offer the rate in the future, which imposes a risk on the lender that they will not be able to complete their hedge

The longer the lock, the higher the risk, and the more the premium they will charge. 

Faster Closings:

By accepting the lower overall risk profile – you will complete your documentation requirements faster.  When you move faster, you close faster – when you close faster you take up less company resources, which allow us to close others faster, etc.

Better Service:

By being more involved and better educated about the process, we can serve you better.  You will have a better than market rate, which will entice you to complete your requirements faster, which will force us to serve you faster and more completely.  A perfect synergy.

Accept the Risk, and likely not pay for it:

This is where Longstreet is different.  Most companies want to you lock your loan for an average of 45 days.  When you lock your loan you are paying for all the items under better rates above, you are just paying for them now, up front, and with a risk premium to cover the risk that you are shifting from your transaction to their transaction.  Indeed, if rates go down you will likely have to start all over with a different lender to get a lower market based rate!  It’s a one way transaction, and you are paying for people who will fall out because they cannot get financing, and at the same time making it hard for you to receive any upside (lower rate) benefit.

Tell me more……

A 45 day lock vs a 15 day lock generally runs a half a point higher in fees, or about .125 higher on rate. (Depending on the program, it can go to 1 point or .25 in rate)

Now we cannot predict the future, but just accept the risk.  Take the lower rate and get all your documents in!

Rates rarely move over short time frames.  I don’t know what the odds are of the rates moving in 45 days, but I am willing to bet they are substantially the same in 15 days.  Heck even if they INCREASE by .125 to .25 in nominal rate, you would be no worse off than if you locked today for 45 days.

If they get better, your rate goes down accordingly – no messing around (see costs section to see how our fees stay the same – we are legally prohibited from just taking the difference for ourselves)

We also ignore the “blown lock” hidden fees.  If we wait until we have a clear to close to lock the rate, we will not “take too much time”  Even if rates have decreased, lock extension fees range from .125 (point) for 3 days, to a half a point for a 15 day extension!  Lock extensions are always “worst case” pricing.  These delays crop up all the time – a heloc that needs subordination, a shared road agreement, or a condo certification that takes too long to come back are some of the common culprits.

Here is some recent data to back up my claim using APOR data (Average Prime Offered Rate) from FFIEC.gov (Federal Financial Institutions Examinations Council)

30 years fixed APOR as of (trying to get as close to the first of the month – it is a weekly number)

11-3-2014   4.02%

10-6-2014   4.22%

9-1-2014   4.14%

6-2-2014   4.17%

3-3-2014   4.43%  

Certainly there are “good days” and “bad days” to lock, but as you can see in the past 9 months the interest rate environment is stable.  Why would you pay .125-.25 in rate to hedge that the rates are not going to go up by more than .25 in the next 15 days?  It is not rational, accept the risk and save the cost.

Go on, Shop around.   When/if you get them on the phone and they give you a quote, tell them you want a 15 day float.  The responses you receive should be illuminating as to the quality and expertise here at Longstreet Financial.