Lenders Revive 'Lock and Shop' Programs

September 18, 2013

Some lenders are bringing back “lock and shop” programs to help home buyers lock in mortgage rates during their house hunt so they won’t need to fear rising rates. 

Premier Nationwide Lending is the latest lender to announce it will now offer a “lock and shop” program. After approving a home buyer for a loan, the company will agree to lock in their interest rate until they find a property to purchase. The home buyer will then be protected against any mortgage rate increases while they look for a home. If rates move lower in that time, the home buyer will have the option to float down to the lower rate.

"The threat of increasing interest rates stripping away a borrower’s loan approval is removed from the equation," says John Hudson, Premier Nationwide Lending vice president of regulatory affairs .

The “lock and shop” program mostly vanished from lenders’ offerings when the market began to get more volatile, Andrew Weiss-Malik, 360 Mortgage COO, told HousingWire. Lenders are reviving the program to gain a competitive edge, he says.

"As the lending market becomes more competitive, some lenders are exploring riskier products to replenish declining loan volumes,” Weiss-Malik says.

One risk from such programs, experts note, are that “lock and shop” programs may prompt home buyers to prolong their home search and place more risk upon the lender. There is no time limit given within the program, so home shoppers can lock in the rate as long as it takes to find a home.

Source: “Lender revives housing boom-era mortgage concept,” HousingWire (Sept. 17, 2013)

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