Rates Keep Dropping, Now What?

Ok, so we all know each week that rates will continue to drop and like clockwork, we reach another "all time low." But now what?

What's your renegotiation policy? Investors have these policies in place to ensure volume levels when rates quickly drop. The goal is to maintain volume and a portion of margins. I'm shocked when speaking to owners, secondary and capital markets managers and sales, to find out how many firms have let's just just say "a loose" policy or no policy at all. This is extremely dangerous and the unfortunate part is that most don't even realize the exposure the firm is taking.

It doesn't matter if you're delivering best efforts, mandatory, or AOT.
BE firms - You're not tricking anyone when you cancel a BE lock and just take a new position with another investor. Large lenders are doing their homework and are sending out invoices to firms which never delivered a BE lock but still closed the file and sent it elsewhere. That's right, pair-offs on BE locks. They take a while, could be 6-12months, but the bills do come.

Mandatory/AOT firms - If you don't have a sound policy you've essentially got some big holes in your pocket. Oh, and it's not enough to have the sound policy, you have to actually follow it!

Lastly, aside from the renegotiation topic, EPOs and CRM Campaigns should be hot topics in times like this as well. If they're not, you may be taking on some risk and missing out on great opportunities!!!