A quick thought for those who sell loans on a mandatory flow or direct trade basis. We all like cash and having a strong reserve strategy is key to handle the ups/downs of the mortgage industry. Nothing like cash to keep you warm during those rough months.
Well with the recent jump in rates, trade positions with the broker/dealers are surely "in the money" and it sure is nice to be on the receiving end of a six, or even seven figure wire. And now with yesterdays sell-off, those January positions are looking pretty again. I've seen some owners giddy this week, admiring their their market to market reports like a proud parent. Of course, this is great from a short term cash flow perspective and certainly welcome for year-end, but be careful here.
Understand, these gains aren't all (or even mostly) profit to be banked in a reserve account. Don't build a false sense of security here. When rates rise, your pull through should as well, which means your "locked" pipeline (to the LOs) will be sold at losses. The gains from the B/Ds will be used to offset the low levels on your purchase advices over the next 30-60 days. Your true gains will be tied more closely to your pull through, (hint: do you have a strong pulse on your "locked" pipeline?!?!?!) not the wires you're receiving this week and possibly January.