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. Delivery

    The action by which an underlying commodity, security, cash value, ...
  4. Best Efforts

    An agreement in which an underwriter promises to make a full-fledged ...
  5. U.S. Savings Bonds

    A U.S. government savings bond that offers a fixed rate of interest ...
  6. Coupon

    The annual interest rate paid on a bond, expressed as a percentage ...
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