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<< Pricing continued from Page 72 “Many originators just want to know they are
getting the best possible prices they can take
to the streets to close deals.”
practice for lenders. Some lenders may
be more transparent with their pricing
and simply collect fixed fees instead of
building in margins. Either way, a price
is provided to originators, which they
can then present to borrowers and
There are more advanced strategies for establishing pricing, of course.
Some companies use “best execution”
from all the pricing available to them,
which just means they must sell the
loans in such a way that maximizes the
The company’s secondary market
team will still add a margin to cover its
costs, but it can then embed that price
in a company rate sheet under its name
rather than under the investor’s name.
This pricing may be available either
alone or alongside investor rate sheets.
Even more complicated options
occur when lenders abandon best-efforts pricing schemes altogether and
base their rates on a mandatory pricing
structure such as assignment of trade,
direct trade or some other strategy.
The bottom line is that it shouldn’t matter to you. If the pricing available to you
is competitive, you will win deals.
n n n
From the perspective of a mortgage
originator, mortgage pricing can seem
like a black box that spits out a rate.
Many originators just want to know
they are getting the best possible
prices they can take to the streets
to close deals. This brief overview of
pricing has attempted to show the
constraints that secondary marketing
teams face when presenting those
Obviously, there are many more elements of the secondary market that can
be explored in depth, including the lock
process, renegotiations and extensions,
pull-through, best-execution strategies,
and bulk-bidding, but for now, remember: “Don’t panic.” n
The recipe for each organization is
different, but this investor choice will
affect the pricing available to you that
you can then take to your borrowers.
Let’s turn now to pricing structures.
How does your secondary team derive
the company’s pricing? Do they build in
margins? Will that affect your profitability and ability to attract new clients?
There are several strategies, from
basic to sophisticated. Some companies
base their pricing on best efforts, which
means the originator will make “best
efforts” to deliver the loan to the buyer
(the investor). In this case, the lender’s
secondary marketing team will look at
the best-efforts pricing available from
their investors, perform a calculation
to add a margin to cover the company’s
costs, and put that revised price on
Many times, this price is labeled
under the name of the ultimate investor.