When a customer locks in their mortgage rate, the lender essentially guarantees the interest rate available at the time of rate lock.
If interest rates go down, the loan could become less valuable on the secondary market when the mortgage lender offers the loan for sale to investors. What to do?
Hedging guards against this risk by allowing mortgage lenders to buy securities and financial instruments which help mitigate against interest volatility, ensuring they can sell the loan at a profit while still helping the customer obtain a favorable rate.
Hedging and risk management software can help lenders track interest rates to find the best rate-lock moment and then identify the hedging strategy for a profitable sale on the secondary market.
For Mortgage Professionals
With the right hedging strategy, agencies can manage their risk and even make an extra profit when they sell a loan on the secondary market.
By helping customers time their rate locks, they can help the customer save thousands of dollars in interest payments over the life of the loan, contributing massively to customer satisfaction.
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Recommendations for Success as Lenders Prepare for the Agency Shift to Securitization In just eight months, the government-sponsored enterprises (GSEs) will begin limiting the amount lenders
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