How do agency rate-lock mechanics work on Fannie DUS and Freddie Optigo?

What sponsors should understand about each structure

Standard rate-lock at commitment: the standard agency execution. Rate is locked when the lender issues the commitment, typically 30 to 60 days before closing. The lender holds the hedge cost during this window; pricing reflects this through the standard agency spread. Best-efforts in nature, if the deal does not close, no break fee.

Early rate-lock (60 to 120 days ahead): available when the borrower wants to lock the rate before commitment to hedge against rate increases. Requires a fee (typically 0.5% to 1.0% of loan amount) plus a rate-lock deposit. The deposit is held until closing and refunded at closing.

What triggers the deposit forfeit: the borrower walks from the deal after early rate-lock, the property fails to satisfy underwriting (occupancy, NOI, cap-ex), or the borrower fails to satisfy the closing conditions. The deposit covers the lender's hedge-break cost.

Index used: agency rates are quoted as a spread over the matched-maturity Treasury (5-, 7-, 10-, 12-, 15-year). The index moves daily; the spread is locked at the term-sheet stage with the rate quoted as the all-in coupon at lock.

Sponsor decision factors: lock at commitment when the rate environment is stable and diligence is moving cleanly. Lock early when the rate path expectation is for material increases (a 50-bp move over 60 days could exceed the cost of the early-lock fee), or when the closing schedule is unusually long.

Practical timing: most agency executions go from term-sheet to closing in 60 to 120 days. The early-rate-lock decision is usually made in the first 30 to 45 days of that timeline, before the bulk of diligence has cleared.