Mandatory Mortgage Lock


DEFINITION of 'Mandatory Mortgage Lock'

The sale of a mortgage in the secondary mortgage market with terms that require the seller of the mortgage to make delivery to the buyer by a certain date or pair-out of the trade. The requirement to make delivery of the mortgage or pair-out of the trade makes a mandatory mortgage lock different from a best-efforts mortgage lock. A mandatory mortgage lock also carries more risk for the seller of the mortgage.

BREAKING DOWN 'Mandatory Mortgage Lock'

Mandatory mortgage locks or trades generally command a higher price in the secondary mortgage market than best-efforts locks. This is because there are fewer hedge costs associated with mandatory mortgage locks.

  1. Mortgage

    A debt instrument, secured by the collateral of specified real ...
  2. Best Efforts Mortgage Lock

    When the sale of a mortgage in the secondary mortgage market ...
  3. Best Efforts

    An agreement in which an underwriter promises to make a full-fledged ...
  4. Delivery

    The action by which an underlying commodity, security, cash value, ...
  5. Encumbrance

    A claim against a property by a party that is not the owner. ...
  6. Maturity

    The period of time for which a financial instrument remains outstanding. ...
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