From Laura Hall, Corporate Investors Mortgage in Chapel Hill:
"Borrowers often inquire about the ability to obtain a lower rate after the loan is locked. This is termed a 'rate renegotiation' or often called a 'float down'. When a loan is locked the lender has obligated that loan, rate and dollar amount back to Fannie Mae, Freddie Mac or Ginne Mae. When a borrower requests a float down the lender must go through several procedures in order to determine if a float down is possible or not. The lender must compare the day the loan was locked (meaning how much that particular interest rate or coupon cost them on the given day) versus the particular day for the renegotiation request and how much the old rate and the new lower rate cost. The lender will have their own guidelines on a minimum in rate decrease, loan status (approved and so on), anticipated closing time etc... When a rate is locked and a float down or renegotiation takes place, the lender is actually breaking the lock and will incur steep fees from Fannie Mae, Freddie Mac and Ginnie Mae. In order to offer the float down, the lender must be able to recoup the fees being assessed."
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