Mandatory Mortgage Lock

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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.

INVESTOPEDIA EXPLAINS '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.

RELATED TERMS
  1. Mortgage

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

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  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. Total Annual Loan Cost (TALC)

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