can someone plz help me answer any of these qs regarding mortgage commitments? 1) Do all fixed-rate mortgages start off as mortgage commitments? Or, is it that whenever a mortgage is about to be originated, the bank gives the customer the option to lock in their rate or to just wait till the closing date and get whatever the rate is then? 2) I am looking at data on mortgage commitments, and they are broken up into two sections: New mortgages and renewals. I understand that renewals are when a customer renews his existing mortgage, but what if the customer’s existing mortgage was with another bank, would this still be considered a renewal? 3) If I’m analyzing how many of these mortgage commitments will be funded (ie i calculate the fallout rate), then how does if it is broker-based or builder affect the fallout rate? 4) Does anyone know what MSF means? It is mentioned as one of the channels, along with Branch, Broker Services, Social Housing, Private Label. Thanks so much!
- most of the time there will be a rate guarantee for some time period. Up here in Canada it usually ranges from 90 to 120 days. So when the borrower comes in to begin the application, he may be close to closing a deal, or it may be far off. Say the deal will close in less than 90 days, the institution will give him the rate at the time of application, hold it and use it so long as rates don’t fall. If they do fall the borrower will benefit from that and get the new lower rate. If the original deal is outside the 90 day range, usually what happens is when the deal closes the bank just grabs the best rate within the last 90 day range and give it to the customer. 2) If the customer changes banks, the new bank would consider that mortgage a new mortgage. 3) If I’m understanding this question correctly, you would need to somehow get the number of applications filed by the broker, and how many actually end up being funded by the bank. I’d think most institutions keep these stats somewhere. 4) I’ve never heard of MSF. In doing some searching, all I could come up with was a company called Money Financial Solutions, which looks like some kind of broker. Hope that helps.
- I agree with most of what Big Babbu said. Most mortgages start with the application, but when the borrower locks in the rate there’s anywhere from a 15 day period to a year before funding (these would of course be dependent on situation and the bank you’re dealing with). 2) Usually, mortgages are broken up into “purchase” and “refinance” categories, I have never heard of a mortgage being “renewed”. So it wouldn’t matter where the original loan was from, if the borrower is occupying the home at the time but wants another mortgage with different terms, he’s still doing a “refi”. 3) The builder usually has a relationship with a bank and funnels those buyers to those banks. I would figure the pull-through ratio for builders would be higher than that of a broker originated mortgage. 4) I don’t know what MSF means, sorry.
thanks a lot guys! can anyone else comment on #2, the answers to that were a littlle conflicting and im still confused if the renewals include the case where a customer switches to another bank.
In Canada, we break mortgages up into terms. For example you might have a 25 year amortization, but the longest term you can get is 10 years, and the vast majority do 5 years. When the five years is up you renew the term (renegotiate term and rate). I believe it’s done somewhat different in the US, thus maybe part of the confusion.
O… Canada. That’s pretty interesting. I never knew that Canadian mortgages would be that different than here in the States.
thx for clearing that up. so since im dealing with canadian mortgages, i guess i can assume that if a customer switches banks, this is not a renewal but a new mortgage commitment. i think another main difference between canadian and US mortgages is that the interest paid on one is tax deductible and for the other its not. does anyone know which one is tax deductible?
Interest is not tax deductible up here unless you happen to be using your home to run some kind of business out of, then you can claim a portion of it. From what I understand you can claim interest costs in the US, but I have no idea to what extent. Your assumption about switching banks would be correct.