Mortgage brokers and lenders report that secondary market lenders are pressuring them to keep up their pull-through rates or risk losing access.

But fickle consumers, lengthy turnaround times for loan processing and lower appraisals are making that hurdle tough to clear.

“If you don’t have consistent pull through with investors and lenders, you lose your rating, and you lose your good prices,” said Jaclynn Sulfaro, president of the Massachusetts Mortgage Association.

After the application process, when a given mortgage rate is locked in, the lender obtains the money to fund the loan from investors. If the loan does not subsequently close, it is deemed to have “fallen out” of the transaction pipeline. A loan that does close “pulls through.”

The ratio of fall outs to pull through can determine profit for the lender – if too many loans fall out, they lose money, even if the funds they obtained for the original loan are subsequently loaned out, because of carrying costs. Several major national lenders have told brokers they want pull-though rates to be more than 70 percent; if that ratio falls, they may cease to work with that broker.

The End Of Rate Locks?

But keeping that ratio high is proving increasingly difficult in the current rate environment. Rates have been volatile for months, approaching or exceeding record lows more than once this year – even as loan turnaround times have grown longer and longer.

“A lot of these lenders have not rehired to meet demand, and their turn times have been stretched from 5, 10 days – some of them are over 30 days before they even look at a file,” said Victor Manganiello, owner of First Boston Mortgage in Woburn.

That leaves ample time for consumers to be lured away to a competitor with the promise of lower rates.

“The internet alone – there’s constant pop up [advertisements],” Sulfaro said. “My own daughter e-mailed me, saying she just got an e-mail saying rates are in the threes.”

Even consumers who stick with their broker may contribute to fallout if the appraised value of their property is lower than expected.

This puts brokers in a bind: If they choose not to lock the rate until a loan is approved, rates may rise in the meantime, and consumers may back out of the deal. If they lock and the loan falls through, they may find themselves on their lender’s bad side.

“Five years ago there were 50 national lenders; you could [tick] one off and you’d have plenty of others to go to,” said Amy Tierce, president of Fairway Independent Mortgage in Needham. “Now you’ve really got five or six. They cut you off and your options become slimmer and slimmer.”

It is possible to renegotiate a locked rate, and some brokers say they’ve found lenders willing to do so.

“We do a lot of renegotiations for our clients,” said Manganiello. “Greater than a quarter-point drop and they do offer them options. We get a lot of those requests.”

But ultimately, with fewer lenders to pick from, some brokers think that the market may be on the road to reviving rate lock fees. Once a standard practice, many lenders stopped requiring rate lock fees during the boom, when competition among hundreds of brokers drove them out of fashion. Now that there’s fewer lenders left standing, and more pressure on brokers to meet their pass-though targets, the result will be brokers and lenders requiring the consumer to have some skin in the game if they choose to lock a rate.

In other states, rate locks are still common, and consumer flakiness much less of an issue. “You lock in a rate, you pay a one point deposit to lock in that rate. It’s standard in [states including Illinois],” Tierce said. “And nobody ever tries to pull out of that rate lock.”