TOPIC: Policy

Correspondent Lender Pricing Overage Question

AVP at a bank ($334MUSA)

We are looking to do some updates to our pricing/lock policy and wanted to get some suggestive best business practices or ideas for how other banks are handling over par pricing. Specifically our bank right now has a best execution model where our loan officers see the "net" price after all LLPA's and bank's set margin. If the pricing comes in below par, we collect from the borrower in points. If the loan comes in over par, we are currently giving the whole credit over par to the borrower when able. We say when able because we have run into instances where due to max cash back restrictions or to meet sellers contractual credit obligations, giving the full credit back creates more work like loan amount adjustments, principal reductions needing done, etc.

What are other institutions doing with over par pricing? We have heard some shops set a cap and will keep any overage up to a certain amount over par like 100.150 or 100.250 and then crediting back anything over those thresholds. Is this most common so the bank earns the additional premium or is it more common to do whatever is necessary to give the full amount over par back to the borrower?

We also have deals that are bank referred deals where if the bank sources the lead on the file and assigns and LO, the bank gets .50 back from commission of the LO on the deal. In the cases where lets say pricing comes in at 99.625 and with the bank referred fee, the total net comes in at 100.125. Is it still best in these instances to give that over par amt back to the borrower or should the bank keep it, or should the LO get credited back the amt towards their .50 referral fee?

So many questions for you and appreciate everyones insight. We did ask our contacts at Plante Moran and they referred us to a brokerage and that did not help us. We are a correspondent lender, self-fund our transactions, and then sell off all loans on the secondary market. 

Thank you all for the help!