These renegotiations are in essence a вЂњsoft falloutвЂќ which is a form of loss mitigation. But if rates fall, closing rates can decline sharply and there will be more fallout as borrowers seek lower rates elsewhere or lenders may renegotiate locks, offering borrowers lower rates to keep them from leaving. A small increase in closing rates might happen if rates rise, as borrowers become more motivated to get deals done. It is essential to also understand how fallout will change if interest rates change. This requires the study of a robust set of your historical data and observing closing rates for different loan characteristics such as product, loan purpose, property type, and credit quality.

The challenge, of course, is in understanding how both operations and market conditions impact your organizationвЂ™s fallout behavior and building a predictive model that makes reliable estimations of expected closings under different market conditions. If you get it wrong, you can suffer serious losses. If your fallout modeling is accurate, you know how much hedge coverage to put on, and your hedge will be successful. Fallout is simply the percentage of loans that donвЂ™t close. To craft the best hedge, you must first understand your pipelineвЂ™s fallout behavior. Layer in the issues associated with the COVID-19 pandemic, and you have a whole new level of uncertainty. Recent market turmoil is challenging the hedging capability of mortgage bankers across the industry. Whitepaper: Fallout from Fallout вЂ“ Secondary Marketing Lessons in Real-time

Freemans will fallout 4