Is your company ready to 'lock and shop'?

Lending software is one tool that financial institutions must keep current. Even though the housing market and overall economy are improving, borrowers with a strong credit history will still be better choices for long-term success.

However, recent reports show that more lending options might soon be available. Called "lock and shop" programs, this option lets a lender approve a potential homebuyer's credit, and then lock in the interest rate before he or she finds property to purchase.

360 Mortgage Group COO Andrew Weiss-Malik told HousingWire that the "lock and shop" program is not new, it is just being used again for the first time in awhile. Lenders just removed it from their programs when the housing market began to struggle.

"Many lenders are scrambling for loans and looking for any competitive edge they can find," Weiss-Malik said. "In addition, as the lending market becomes more competitive, some lenders are exploring riskier products to replenish declining loan volumes."

However, many hopeful homeowners tend to prolong their search because they are trying to find the lowest rate possible. That, according to Weiss-Malik, is the program's greatest challenge. The "lock and shop" option generally has a lower pull-through rate and a guaranteed float down rate negatively impacts a hedge position. Lenders could then expose themselves to greater risk.

Whether a financial institutions wants to implement "lock and shop" or not, it is important for them to be aware of all business rules and ensure that they have strong lending software in place. Every bank wants to remain profitable, and draw in more customers. However, it is still critical to find creditworthy borrowers who will remain on top of all financial obligations.

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