Locking with a mortgage broker isn't quite the same as locking with a lender. In most cases the broker will follow your instructions, locking with the lender when you tell him to.

Some brokers, however, will charge borrowers the lock price but won't lock with the lender. If the market doesn't change, they pocket the price difference.

Brokers rationalize this practice on the grounds that they protect the borrower themselves. The broker plans to absorb the loss if interest rates go against them. (In effect they're acting as speculators.) But what happens if interest rates spike?

Here's an example.

For example, in the two-month period of late January to early March 1980, rates on 30-year fixed-rate mortgages jumped from 12.88 percent to 15.28 percent. A broker who locked for 60 days at 12.88 percent would have to pay a lender about 15 points to accept a loan with that rate in a 15.28 percent market. The broker would either go out of business, or deny that a lock was given. (Broker locks are oral commitments.) The borrower would be left high and dry in either case.

A broker "locks" is an unscrupulous practice because the borrower is led to believe that the lender is providing the lock. How do you protect yourself? Easy - simply insist on receiving the rate lock commitment letter from the lender identifying you as the applicant.

In principal a lock commits the buyer as well as the lender. A borrower who wants to be protected against a rate increase during the lock period, but would like to take advantage of a rate decline, can purchase a "float-down." A float-down provides the same upside protection as a lock, plus an option to reduce the rate if market rates decline.

Since it carries more value to the borrower than a lock, and is more costly to the lender to provide, the borrower pays more for it. A lender who charges 1.25 points for a 60-day lock might charge 1.75 points for a 60-day float-down.

Many refinancing borrowers pay for a lock but act as if they have a float-down. If rates decline during the lock period, they demand a lower rate and if they don't get it, they start over with another loan provider. While that isn't ethic, many people do it.

Here's my best advice in regards to locking: If you're comfortable with the rate you are receiving, go ahead and lock.

If interest rates fall, you may be disappointed, but the interest you're paying is at least something you have rationally decided you're comfortable with.

If rates rise, you're protected from paying more than you might be able to afford. And once you lock, get proof of the lock in writing.