32 Rate Locks and the Loan Commitments Pipeline

A Rate Lock is a lender's promise to hold a certain interest rate for the borrower, usually for a specified period of time and fee, while the loan application is being processed.

Rate locks are commonly granted to borrowers when they apply for a mortgage loan and carry a term of 30, 60, or 90 days. In Oracle Funds Transfer Pricing, these loan commitments (which are not yet on the balance sheet) are stored in the FSI_D_LOAN_COMMITMENTS table, separate from loans that are already funded. These loan commitments can be Transfer Priced using implied forward rates, which correspond to the assumed loan start date (end of commitment period). This capability allows the treasury to “lock-in” a loan-funding rate at a point in time before the actual loan funding. For more information on using the Forward Rates option, see the Transfer Pricing Process.