Locked Loan Fallout and Pandemic

by MCM Analyst 3/19/2020


Dear Valued Clients and Friends-


Due to the current environment we are all facing I have concluded that business “as usual” will not suffice, as we have never had a situation quite like this in my 30+ year mortgage banking career.  In the current environment, we are starting to see a great number of people getting laid off or other temporary work adjustments. If this continues, more will be on the way and all indications are that at least during the processing time-frame of your pipelines’, things are not likely to get significantly better.


My question to all our clients is this: will we see higher than normal fallout for loans “In Process” or in an “Approved” status for both refinances and purchases due to potential borrowers not qualifying because of job loss or perceived job insecurity?  Can or will you fund a loan for borrowers who have lost their job during the processing period? What about people who are told they are temporarily laid off? What about EPD’s? Early Payoffs and Correspondent SRP clawbacks?


My gut feeling is that most will see an increased level of fallout in addition to the normal fallout increase estimated by the current model that considers volume increases and price volatility, amongst other factors. Therefore, I recommend an increase of 5-10% on our model’s fallout assumptions on refinances that are “In Process” and a 2-5 % increase for “Approved” and a 1-3% increase on “Purchase” lock fallout.  The past 12 days have produced an avalanche of potential business so this would not be a small adjustment, however, I don’t think it will close as normal due to the conditions caused by the announced pandemic.


The good news is that the market has sold off so much over the past couple of days that it now stands below where we were before all this started 12 days ago.

Please respond with your instructions to proceed as outlined above. Provide any alternative assumptions you would like MCM to implement or instruct us to stay the course with the current models that have performed very well over the years.


Stay safe and well!



Dean Brown