Since I come from a Secondary and Capital Markets background, I'm always thinking about risk and exposure mortgage bankers take on a daily basis. The larger concern is that most do not even realize they have this exposure until it's too late.
For those bankers who hedge their locked pipelines, I can't help but ask whether you run what I call the RONCO model of "Set it, and forget it." Trust me, you don't want an analogy made between an infomercials, no matter how successful, and a philosophy of your capital markets department. How careful are your with your coupons?
Mortgage rates continue their volatility and it's important to understand how market swings effect your hedge coverage and the coupons you use. For 30 ye fixed product, both 3.5% and 5% coupons are currently fringe coupons - this means that trading can be inefficient and illiquid.
I don't care how smart you are, nobody knows what the future will hold for mortgage rates. We're living through historic times here and we're seeing unprecedented regulation and a few big players are controlling most, if not the entire market. Nothing would surprise me. My point here is that outliers can be dangerous, especially in a volatile market where rates and coupons could be "here today, gone tomorrow."
Don't take on unnecessary exposure. Ask yourself, who's got my back? Who's watching my coupons?