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.

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