Recent months have seen a flurry of lock failures – refusals by lenders to honor mortgage prices that borrowers had believed were guaranteed. Last week I discussed some reasons why this happens. That discussion assumed, however, that the borrower dealt directly with the lender. Usually, a mortgage broker is involved. "Does working with a mortgage broker, as opposed to dealing directly with a lender, increase or decrease the probability of a lock failure?" It can go either way. One advantage of dealing with a broker is that brokers have the same interest as borrowers in avoiding lenders who dishonor locks. Brokers won't use wholesale lenders whose lock commitments include escape clauses that let them off the hook in a rising rate market. Were this to happen, the borrower might well blame the broker. However, brokers cannot monitor how well lenders manage their finances. The single worst episode of dishonored locks in 2003 resulted from failure of a wholesale lender. The b...
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