Referrals are nice to have, but not much use in preventing lock failure. The lender trying to make as much money as possible in a favorable market will meet commitments and get good references so long as the market stays favorable. The question is, what happens when the market turns bad? The only references of any value are those from borrowers who had locks that were honored despite a rise in market rates after the lock date.

Borrowers should also check the lender's lock requirements, which vary widely. Some charge nothing and require submission of a limited amount of information. Others charge a fee that is returned to the borrower only if the loan closes or if the borrower is rejected. A "lock-jumper" who bolts in search of a better deal elsewhere, loses the fee. Such lenders may also require submission of a full application and perhaps other documents, such as an appraisal.

In general, the tougher the lenders' lock requirements, the more likely that the lender will honor a lock in a rising rate market. Lenders who turn away business in stable/declining rate markets by making it difficult for lock-jumpers are demonstrating that they expect to be around for a long time.

Borrowers should also examine the lender's commitment letter with care. The letter almost always specifies conditions that the borrower must meet, the only question being whether the conditions are reasonable. Requiring that homeowner insurance and title insurance be in place is reasonable; requiring that the borrower's application must be acceptable to the investor to whom the lender intends to sell the loan, is not reasonable.

Borrowers who deal with mortgage brokers can usually depend on the broker to select a reliable lender. The borrower's focus should be on selecting the right broker. A particular concern is avoiding deceitful brokers who offer fake locks.

A fake lock arises when the broker tells the borrower the loan is locked with the lender, when it isn't. If market rates don't increase, the broker pockets the difference between the price quoted by the lender for a 30, 45 or 60-day lock period, and the price quoted for delivery in a few days. If rates increase just a little, the broker may honor the lock at his own expense. If the increase is substantial, the broker runs for cover and the borrower is stuck without a lock.

To avoid this, borrowers interviewing brokers should indicate that they expect to see a written lock confirmation from the lender shortly after a lock is submitted. Upfront Mortgage Brokers will always provide this on request, and many others will do so as well, but brokers who did not lock with the lender will be unable to comply.

Avoiding a sloppy broker who may not get your loan processed within the lock period is more difficult. Many brokers will never turn down a prospective client, no matter how many they already have. Their view is that in a highly cyclical business, they have to make their money when they can. In addition, they never know how many of their prospective clients are "lock jumpers" who will go elsewhere if rates decline during the lock period.

What you want is a broker who plays hard-to-get in order to avoid wasting time on borrowers who don't stay the course. These brokers require that borrowers make a commitment to them. This might be a contract making the broker the borrower's exclusive agent in securing a loan, or it might be a requirement that the borrower pay one or more fees in advance.

This is the broker you want, but you don't commit yourself without the broker committing to you. That means an agreement, in writing, on the broker's total fee, including any payment to the broker from the lender. (This is called a "yield spread premium"). Upfront Mortgage Brokers do this as a matter of course, but other brokers will do it, as well, if you request it.