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Mortgage Brokers Can Lock You In at One Wholesale Lender, Then Lock You In at Another If Rates Move Down to Make More Money.

This is a little trickier for the loan officer, because if the loan officer pulls this stunt too many times with his wholesale lenders, those lenders will cut him off completely, and soon he'll have no place to send his loans.

When an official interest-rate lock is made, lenders get serious about it. When someone locks in a loan at 6.00 percent, that lender books the loan even before it closes and designates it for either sale or servicing. If a lender has $1 million to lend and suddenly five people, all with $200,000 mortgages, lock in their loans with that lender, the lender stops making mortgage loans.

At least, until the lender finds another $1 million to lend.

When loan officers "break" locks with a wholesale lender or with their secondary department, they have to answer for it. By locking, the loan officer has officially reserved a chunk of mortgage money from the lender's accounts and taken it off of the table where other loan officers could use it.

Some mortgage brokers will officially lock in your loan with one lender, but keep an eye on mortgage rates just in case they move in her favor—and if they do, the broker then locks with another lender, dumps the old lender, and delivers to the new one. If rates move 1/4 percent after your lock, the broker will make another point off of your loan.

While this might prove profitable to the broker for a while, she'll soon find out that some wholesale lenders don't want that sort of business. It actually costs the wholesale lender money when it has to "bust out" a lock and find another one to replace it.

This practice of locking at one lender and still playing the market is more difficult to do nowadays. If rates move down and the broker wants to send you to another lender, then a brand-new appraisal has to be ordered. Historically, if someone changed lenders, the appraiser would simply change the name of the lender that shows up on the appraisal report. This is called a "retype," and it costs about $50 or so. New regulations for appraisals essentially negate that option, so a brand-new appraisal must be ordered. That means another $400 or so, and it also means taking up precious time while a new appraisal is performed.

If you're buying a house and closing within 30 days, you probably don't have the time to change appraisals, much less change lenders. You might have some time in the case of a refinancing, where the decision as to whether to close on a loan is completely up to you.

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