There’s growing debate among some brokers as to whether lenders should remove maximum buy-down restrictions and allow them -- and only them -- to decide just how low to go to retain a client.
"Some brokers are willing to work for 40-50bps and will buy down a rate to keep a client," says Jim Tourloukis, broker/owner of Advent Mortgage. "The decision to buydown a rate should lie with the individual who is paying to buy it down -- the broker! The lender should be indifferent if a broker is willing to buydown a rate as the cost is borne by the broker, not the lender."
For many mortgage professionals, that sentiment has a ring of truth although in the current marketplace, it may be a moot point.
They reference the highly competitive broker rates and the limited need to buy-down rates beyond the restrictions most lenders now apply. Most do allow brokers to offer rates at least 10 bps lower,although in some cases no more.
That has usually provided brokes enough elbow room to save a deal.
Still, a number of industry vets are already reporting a ramp-up in rate competition among banks looking to protect themselves against switches at or before renewal. That phenomenon – plus continued slowing in new home sales – suggests that brokers may soon come under pressure to lower their rates beyond what some lenders currently permit.
Some brokers also point to lender reward programs that have been built to faciliate buydowns as another reason why they should be permitted to discount more deeply.
But buying down that low isn’t necessarily a winning strategy, argues Michael Celuch, an MI broker in Windsor.
“I think what the lenders provide now is enough,” he says. “Going lower isn’t necessary, really.”