PennyMac Tries To Stop Mass Exodus Of Customers By Offering 90 Day Rate Locks
PennyMac has dubbed the program “Lock & Shop.”
The company rolled out the product in mid-June. It has two terms. The first being the 75-day lock. This gives borrowers 45 days to shop and 30 days to close the contract. The second is the 90-day lock. This program gives customers 60 days to find a home and 30 days to complete the contract.
The product also allows a one-time float down if rates decline. It’s available for all loan types, except for jumbo.
PennyMac’s product allows borrowers to extend their lock-in period at an updated rate if they do not find a house. Bridges said there’s no upfront fee, but the lender requires a pre-approval to ensure borrowers qualify for a mortgage loan – in this case, the lender gives 50 basis points on the closing costs.
The product does not require a property address to guarantee a mortgage rate. Founded in 2020 by former Zillow executives Greg Schwartz and Carey Armstrong, the fintech startup focuses on the $1.6 trillion purchase mortgage sector.
Pennymac is the latest mortgage lender to freeze rates for borrowers. In late June, fintech startup Tomo also announced a “Lock & Shop” product, allowing borrowers to lock in a mortgage rate for as many as 120 days
Since January, mortgage rates have risen quickly due to high inflation and the rising of interest rates.
When rates are surging, lenders’ capital markets teams have trouble selling loans locked at a lower rate. This is because investors demand higher returns. That often forces lenders to sell at par or take a loss.