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Monday, May 20, 2019

I have a client who was recently referred to me who was “shopping around” after getting his pre-approval from a local commercial bank. Remarkably, he was under the misconception that he was obligated to use the bank that issued him the pre-approval when his purchase offer was accepted. A friend of his, who was a past client of mine, wasn’t sure about the official policy but told him to call me anyway to see how I would compare to the quote he received and to find out if he had options.

He is “unequivocally not required” to use the bank that gave him the pre-approval, I noted. I did, however, recommend that it’s certainly “the right thing to do,” to give that bank all opportunities to retain him as a client and earn his business. After all, they did spend time and effort getting him that initial pre-approval. He agreed with my suggestion and promised to circle back in a day or two.

A few hours later, I received a text saying that the bank loan officer said that if he were to lock in the rate before the end of business, the bank would waive his $395 application fee and give him a credit at closing of $250 if he opened an account with their bank. He told me that he was actually very happy with his current bank and didn’t want to open an account elsewhere, which they would use to deduct the mortgage payments every month. He was even willing to forgo their incentive.

Additionally, he truly did not want to proceed with a mortgage application, with anyone, until after the home inspection because he was concerned the house would have issues. He questioned why he should give the bank $2,500 to lock in the rate if he might not move forward with the transaction? My first thought was, $2,500 for a rate lock deposit?! That seemed excessive. Granted, the fee would be returned, but still, understandably, the client didn’t want to advance additional monies for a rate lock at that time.

Aside from the home inspection concerns that he brought up, I also shared with him a few of the upcoming economic calendar items that would influence rates over the next few days. It was my prediction that rates might actually decrease given the financial reporting. I was also more confident to provide him with this forecast because I knew that bonds had a strong resistance that they would need to break through, even if the reporting turned out to be more favorable than anticipated. (Yes, watching bond charts is a passion of mine.)

On Thursday, New York Fed president, John Williams, said that the US economy is heading into a “new normal” of slower growth that will likely keep monetary policy restrained. He believes GDP will slow to two percent this year, citing a global slowdown, geopolitical uncertainty and tighter financial conditions as his three constraining factors.

This week also had the ADP Employment Report which showed that there were 183,000 jobs created in the private sector in February, which exceeded expectations of 180,000. Mark Zandi, the chief economist at Moody’s was a bit negative on the news and thinks that job growth is slowing. The 10-year US Treasury, which has been fluctuating between 2.60 and 2.80 the entire year, dropped below 2.70 on the comments from Williams and the potential economic slowdown. The result caused mortgage rates to dip once again, nearing 12-month lows.

While this might all seem like “overkill” for someone just looking to “get a mortgage” to buy a house or to refinance, these matters are all related. In an environment where everyone is offering quick fixes, easy access and self service when it comes to the most significant investment of a person’s lifetime, a little insight goes a long way. To my now-new client, my practical guidance and advice not only saved him pressure and frustration, but he earned a lower rate because of his faith and trust in me.

Shout out and happy birthday to Chaim Kowalsky, Shira Kronenberg and Helen Pieri (with a special congratulations to Helen)!

By Shmuel Shayowitz


Shmuel Shayowitz (NMLS#19871) is president and chief lending officer at Approved Funding, a privately held local mortgage banker and direct lender. Approved Funding is a mortgage company offering competitive interest rates as well as specialty niche programs on all types of residential and commercial properties. Shmuel has over 23 years of industry experience including licenses and certifications as certified mortgage underwriter, residential review appraiser, licensed real estate agent and direct FHA specialized underwriter. He can be reached via email at [email protected]