CHAPTER 3 RATES AND RATE LOCKS – CORRESPONDENT
CHAPTER 3 - RATES AND RATE LOCKS .............................................................................................2
DAILY RATES ..............................................................................................................................................2
OVERNIGHT PRICE PROTECTION .......................................................................................................2
REMINDERS WHEN PRICING YOUR LOAN ........................................................................................2
LOCK TRANSFERS ....................................................................................................................................3
PROPERTY ADDRESS CHANGES ...........................................................................................................3
LOCK-IN .......................................................................................................................................................3
90-DAY RATE LOCKS ............................................................................................................................... 4
LOCK CONFIRMATIONS .........................................................................................................................4
LOCK CANCELATIONS ............................................................................................................................4
ESCROW WAIVER FEES ..........................................................................................................................5
DELIVERY EXPIRATION REQUIREMENTS ........................................................................................5
EXPIRATION OF THE LOCK-IN PERIOD ...................................................................................................... 6
RE-LOCKS ....................................................................................................................................................6
RE-LOCKING DENIED LOANS................................................................................................................7
LOAN AMOUNT TOLERANCE ................................................................................................................7
LOANS IN PURCHASING SUSPENSE .....................................................................................................8
CLOSED LOANS INELIGIBLE FOR SALE (NON-PURCHASABLE) ................................................8
EARLY PAYOFF POLICY .........................................................................................................................9
FALLOUT LOANS .......................................................................................................................................9
Correspondent/ Rev. 9-02-2014
1
Chapter 3 - Rates and Rate Locks
Daily Rates
Merchants Bank will publish correspondent lending rates and prices at
approximately 9:00 a.m. each business day to the loan origination system. The
daily rate sheet is e-mailed through our e-mail distribution list and is available for
viewing on the Merchants Bank Landing Page. Please contact the Pricing Desk
at pricingdesk@merchantsbank.com to add or remove your contact e-mail for the
distribution list.
During normal lock volume all lock-in requests are confirmed on business days
between the hours of 8:00 a.m. and 4:30 p.m. central time. The ability to lock-in
or float is also available on Saturday, Sunday and Holidays.
Pricing is suspended on business days between the hours of 7:30 a.m. and 9:00
a.m. central time, and during any intraday pricing suspension due to a
deteriorating market. You cannot Lock-In your loan during this time.
Overnight Price Protection
Merchants Bank offers overnight price protection utilizing the previous day’s
pricing until 7:30 a.m. the following morning. The Correspondent Lender may
continue to price and Lock-In loans after business hours and on the weekends.
All Lock-In requests received by 7:30 a.m. will receive the previous business
day’s rates and will be confirmed prior to newly published rates.
Any overnight locks that require denial by the pricing department, such as
incorrect product selection, will be subject to the current day’s pricing which will
be posted after 9:00 a.m.
Reminders When Pricing Your Loan
It is very important to have the following items as accurate as possible in the loan
application when locking your loans. These items influence credit reports,
automated findings, base pricing and pricing adjusters that display within the loan
origination system.
Double check the following before locking your loan:
~ Borrower(s) first, middle and last name(s)
~ Social Security Numbers
~ Property Address
~ Application Date
~ Loan Type (Purchase vs. Refinance)
~ Term
~ Interest Rate
Correspondent/ Rev. 9-02-2014
2
~ Refinance Purpose Type (Limited vs. Cash-Out)
~ Subordinate Financing Type
~ Subordinate Financing Amount
~ Property Type (SFR, Investment, Manufactured)
~ Property Class (Condo/PUD/Attached/Detached)
~ Sales Price
~ Appraised Value/Estimated Value
~ Waive Escrow’s
~ Construction to Permanent Refinance versus Conventional Refinance
~ Correct Product Selection (i.e. DU Refi Plus versus Conventional Fixed Rate)
Lock Transfers
If a locked loan requires new application registration due to data input errors, the
lock will not transfer to the new application registration and will need to be repriced at worst case pricing. Please see the section on “Re-Locks”.
Property Address Changes
A Lock-In cannot be carried over to a new property address. If a borrower makes
application with a new address, a new loan will need to be registered and a new
lock will need to be submitted as a new lock-in with no pricing penalties. The lock
follows the address, not the borrower.
Lock-In
A loan may be locked at the time of registration for a period in accordance with
the terms of Merchants Bank daily pricing sheet.
The rate and points may be Locked-In for the specified period and will remain the
same until the expiration date. Lock-In should occur on or before the closing
date of the loan. If the loan is locked-in after the closing, pricing will be taken at
current market pricing minus 0.125 basis points off the base price.
If the loan is not closed, disbursed, and delivered to the Merchants Bank
Purchasing department on or before the lock expiration date, the rate and points
will return to Float. When this occurs, the loan can be re-locked at worst case
pricing. Worst case pricing is the lesser of the original lock-in price or the current
market price with a minimum of a 0.125 base price difference from the original
lock-in price.
o All refinances must be closed and funds disbursed on or before the lock
expiration date.
o Rescission periods must be included within the lock period.
o The loan must be delivered to the Purchasing department on or before the
lock expiration date.
Correspondent/ Rev. 9-02-2014
3
90-Day Rate Locks
The 90-day lock is available for loans underwritten to Fannie Mae. A refundable
upfront fee of .375% of the loan amount is required. The fee will need to be
remitted to the Merchants Bank Pricing Department within 7 calendar days of
locking the rate. If the fee is not received within this timeframe, the lock will be
automatically cancelled and will be subject to worst case pricing.
In addition to the closing package being received by the Merchants Bank
Purchasing department prior to the original lock expiration date, the up-front fee
is refundable to the Correspondent when the closed loan is purchased by
Merchants Bank. The refundable portion of the upfront fee will be returned to the
correspondent by check after the loan has been purchased.
For any reason, if the closing package is not delivered in purchasable form to
Merchants Bank by the 90th day, the upfront fee will not be refunded. Ninety day
locks may be extended, however, the up-front fee will be forfeit.
The up-front fee is non-refundable in the event of borrower withdrawal,
correspondent cancelation, correspondent denial or Merchants Bank denial. Any
re-lock of a 90 day lock-in will be subject to the re-lock policy at worst case
pricing. Please see section “Re-Locks”.
Mail or Overnight 90 Day Upfront Fees to:
Merchants Bank, National Association
Attn: Pricing Desk
62 W. Third Street, Suite 90
Winona, MN 55987
Lock Confirmations
A Lock Confirmation notification will be sent via e-mail to the loan originator
assigned to the loan. If a lock confirmation is not received by the next business
day, please contact the pricing desk at pricingdesk@merchantsbank.com. During
normal lock volume all lock-in requests are confirmed on business days between
the hours of 8:00 a.m. and 4:30 p.m. central time.
Lock Cancelations
The correspondent lender is responsible for requesting a lock cancelation on all
locked loans. This includes loans that are denied by the Merchants Bank
underwriting department. The Merchants Bank underwriting department will not
notify the pricing desk of denied loan files or request that a lock be canceled on
behalf of a correspondent lender. The lock can be canceled through the loan
origination system by the correspondent lender.
Correspondent/ Rev. 9-02-2014
4
Escrow Waiver Fees
A flat fee of $315.00 will be charged to waive escrows on all loans with a Loan to
Value of 80% or less. This fee is charged to waive any or all portions of the
escrows.*
*Iowa Properties- This fee will be waived at the time of loan purchase by the Purchasing
department.
Escrows are not allowed to be waived on any loans greater than 80% Loan to
Value. Files requiring flood insurance will not be allowed to waive escrows
regardless of LTV percentage.
Delivery Expiration Requirements
Lenders are expected to close and deliver the loan in purchasable form on or
before the lock expiration date. If the loan is received after the lock expiration
date, the loan will be re-priced at worst case pricing. A lock extension will not be
available. Please refer to the “Re-Locks” section.
Once locked, it is the responsibility of the correspondent to notify the pricing desk
if a loan is canceled or denied by the correspondent, denied by Merchants Bank
underwriting, or is withdrawn by the borrower.
If a loan has been locked and not denied by Merchants Bank and is subsequently
withdrawn to sell to another lender, Merchants Bank may consider this action
grounds for terminating a correspondent relationship. This does not apply if the
borrower withdraws their application to finance their loan at another
correspondent lending institution.
All extension fees are calculated as a pricing adjuster percentage of the loan
amount in the Lock Pricing Summary section of the Lock Summary screen. There
are no refunds of unused extension days.
A rate lock extension must be requested on or before the lock expiration date. A
one-time extension may be requested on locked loans. Locks may be extended
accordingly to their investor schedule below. (This schedule is subject to
change.)
Freddie Mac
Calendar Days to
Extend
2 days
10 days
11 days or more
Extension Fee
Free
-0.250
Worst Case Pricing
*A Freddie Mac loan cannot be extended for more than 10 days or the loan will
need to be re-priced to worst case pricing.
Correspondent/ Rev. 9-02-2014
5
Fannie Mae
Calendar Days to
Extend
2 days
7 days
15 days
20 days
30 days
31 days or more
Extension Fee
Free
-0.125
-0.250
-0.375
-0.500
Worst Case Pricing
*A Fannie Mae loan can only be extended a maximum of 30 days or the loan will
need to be re-priced at worst case pricing.
Expiration of the Lock-In Period
A. When the loan involves a 3-day Right of Rescission, the loan must pay-out
(disburse) and be delivered to the Purchasing department no later than
the lock expiration date in order to remain at the locked in rate and points.
B. When the expiration date falls on a Saturday, Sunday, or a Holiday, the
loan must be delivered prior to that date. Merchants Bank will only
recognize holidays when Merchants Bank is not open for business. If the
loan will not be delivered to Merchants Bank prior to the weekend or
holiday, the lock will need to be extended.
Re-Locks
Worst case pricing is the lesser between pricing from the original lock-in date and
the current market price with a minimum of a 0.125 base price difference from
the original lock-in price. Pricing will never improve from your original lock-in
price.
All re-locks past 60 calendar days of the lock expiration/cancellation,
whichever is later, may re-lock at current market pricing with no base pricing
penalties. All previous extension and over/under-delivery fees will not apply.
o For example: A lock that expired on June 1 can re-lock on July 31 or later
with no penalties.
If a loan is re-locked within 60 calendar days after the lock
expiration/cancellation, whichever is later, it will be calculated at worst case
pricing. All previous extension and over/under-delivery fees will apply.
o For example: A lock that expired on June 1 and re-locks between June 2
and July 30 will be subject to worst case pricing and any previous fees.
All re-lock periods must be for the same length as the original lock period or
longer. The longer period will be used when reviewing the pricing between the
original lock-in date and the current market price.
Correspondent/ Rev. 9-02-2014
6
The correspondent lender will be subject to a pair-off fee if a re-lock is cancelled
for any reason including correspondent denial, withdrawal and cancellation or
Merchants Bank denial.
Re-Locking Denied Loans
Loans that have been appraisal or credit denied by the Merchants Bank
underwriting department may be re-locked without base pricing penalty past 60
days from lock expiration/cancellation, whichever is later. All previous
extension and over/under-delivery fees will not apply.
Denied loans that are re-locked within 60 days of the lock
expiration/cancellation, whichever is later, will be subject to worst case
pricing. All previous extension and over/under-delivery fees will apply. Worst
case pricing is the lesser between pricing from the original lock-in date and the
current market price with a minimum of a 0.125 base price difference from the
original lock-in price. Pricing will never improve from your original lock-in price.
Loans that were previously denied must have underwriting approval prior to relocking within the 60 day time frame.
All re-lock periods must be for the same length as the original lock period or
longer. The longer period will be used when reviewing the pricing between the
original lock-in date and the current market price.
The correspondent lender will be subject to a pair-off fee if a re-lock is cancelled
for any reason including correspondent denial, withdrawal, cancellation or
Merchants Bank denial.
Loan Amount Tolerance
There is no minimum loan amount required for lock-in.
All locks are allowed a $10,000 variance from the original lock amount, either an
increase or decrease, without incurring any additional fees. This tolerance is
based upon the original lock amount and will not float with each loan amount
change. If a lock exceeds the $10,000 variance it may be subject to fees.
For example:
An original amount that is $100,000 and is reduced down to $90,000 does not
incur any fee. However, if the lock is again reduced down to $85,000, the lock
may be subject to an under-delivery fee. The same principle works for an overdelivery.
Correspondent/ Rev. 9-02-2014
7
Loans in Purchasing Suspense
If a loan is suspended with the Merchants Bank Purchasing department, the
lender will be notified of the additional document(s) or correction(s) needed for
purchase. The lender will have until the later of the lock-in expiration date OR
seven (7) days from the date Merchants Bank issues a suspense notice to satisfy
any conditions prior to purchase.
~If the deficiency is not cured after 7 calendar days from the date of suspension,
the loan will be net funded a discount of twelve and a half (.125%) basis points at
the time of purchase.
~If the deficiency is not cured prior to 14 calendar days from the date of the
suspension, the loan will be net funded twenty-five (.250%) basis points at the
time of purchase.
~If the deficiency is not cured prior to 21 calendar days from the date of the
suspension, the loan will be net funded fifty (.500%) basis points at the time of
purchase.
~If the deficiency is not cured within thirty (30) calendar days from the date of the
suspension, the loan is no longer eligible for purchase and Merchants Bank will
begin the process for Closed Loans Ineligible for Sale.
Closed Loans Ineligible for Sale (Non-Purchasable)
If a closed loan has been submitted to Merchants Bank for purchase and it is
found to be ineligible for sale, the correspondent will be responsible for any fees
incurred due to the cancellation of the loan. Applicable fees would be the pair off
fee, extension fees, previous pair-off fees, over/under-delivery fees and
underwriting fees. The original note will be held until all fees have been remitted
by the correspondent.
Once all fees have been received you may choose to re-lock and refinance the
borrower at current rates with no additional pricing penalties. The new loan will
need to be submitted to underwriting for another full review and new documents
must be drafted.
A closed loan is considered ineligible due to any of the following, but is not
limited to:
• Loan is not eligible for MI due to credit, DTI, product type, etc.
• Expired credit documents
• Credit is not sufficient
• Excessive DTI
• Short funds to close, not enough assets verified
• Borrower not contributing minimum down payment requirement from their
own funds
• Not eligible as structured, i.e. cash-out where borrower has not owned
property for at least 6 months prior to application date
• Property currently listed for sale or listed in the past 90 days
Correspondent/ Rev. 9-02-2014
8
•
•
•
•
•
•
•
•
•
•
•
Social Security number does not match from 1003 to credit bureau
Tri -merged credit report is showing an error reported by one for the bureaus
Limited cash-out where previous loan is not at least 6 months as of time of
application, where subordinate financing was paid
HCLTV/CLTV exceeds guidelines
New subordinate financing with a balloon payment less than 5 years
Gift funds from an ineligible source, i.e. family friend, girl-friends family
member when the girl-friend is not on the loan
Borrower requiring more cash to close than what was approved
Seller paid concessions exceeding guidelines
Refusal to sign a Holds Harmless
Excessive Allowable Closing Costs (5% calculation)
Escrows waived on loans over 80% loan to value ratio
Please remit all fees for Non-Purchasable Loans to:
Merchants Bank, National Association
Attn: Pricing Desk
62 W. Third Street, Suite 90
Winona, MN 55987
Early Payoff Policy
For any mortgage loan that is prepaid in full on or before 120 days following
Merchants Bank purchase of the loan, the Correspondent shall refund to
Merchants Bank, within 30 days after Merchants notifies the Correspondent of
the prepayment, an amount equal to the Service Release Premium and Yield
Spread paid for such loan.
Fallout Loans
Merchants Bank’s ability to offer competitive pricing is directly affected by our
customer’s ability to manage their fallout ratios. Fallout occurs when a loan is not
delivered according to the lock-in terms. A loan is considered a fallout loan if:
o The lock-in expired prior to the loan delivery,
o The loan was denied,
o The loan was withdrawn or cancelled, or
o For any reason the loan did not close according to the lock-in terms.
Correspondent lenders are responsible for notifying the Pricing Desk within one
(1) business day if a loan falls out due to denial or withdrawal. If a locked-in loan
is withdrawn, an audit may be performed to verify that the borrower has
withdrawn the loan.
During any sixty (60) day period, fallout loans are measured by dollar amount,
and by number of successful deliveries versus unsuccessful deliveries. Fallout
loans must not exceed twenty (20) percent of all loans subject to a lock-in.
Correspondent/ Rev. 9-02-2014
9