Rob Chrisman – Pricing Engine Volatility

Maybe it will take loan reps’ minds off of the volatility that apparently is wreaking havoc with pricing engines out there. Last week Optimal Blue “hesitated”, and this week reports from agents say that NLYX is suffering the same fate. I am positive that I will hear from every owner of every pricing engine, but the perception out there is that some pricing engines can’t keep up with the volatility and constant investor re-prices. Engines, whether they have functioned flawlessly for the last week or not, are having capacity issues when the market starts to make changes, whether it is the two listed above or others such as LoanSifter, Sollen, OpenClose, Avista, etc. The issues range from slower decision times to a complete temporary shutdown. Either way, loan agents may think that this is a conspiracy to slow locks down, which it is not although not being able to take locks during certain market conditions helps hedging. And no, I am not going to print a list of every pricing engine, which ones shut down, which ones are fine, and so forth.

To elaborate about pricing engines, vendors warn clients that pricing engines all scrub their data prior to it hitting a client’s account, and if, after that, a particular lender has overlays it will take even longer to produce a price. Most of us, especially me, have no idea how complex a pricing and “decisioning” engine is. Pricing engines are dependent upon investor information, so if the investor is slow in updating a price, this impacts the turn time of the pricing engine from the loan rep’s perspective. (In “the old days,” we’d just shut down our lock desk if the market went wild.) With the volatility in the last few weeks, all the pricing engines set volume records in both pricing searches and in rate sheets loaded, basically doubling their average daily volume, and remember that searches just don’t come from loan agents – searches by consumers using Google, Lending Tree, Zillow, etc. – only increase the traffic. There are, no doubt, customers out there contemplating changing price engines, moving from A to B, with probably an equal number thinking about going from B to A.  But despite the delays it would be difficult to find an old-fashioned lock desk that could produce a manual rate sheet in this environment that is better than the engines.

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