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Definition of 'Mortgage Putback'
The forced repurchase of a mortgage by an originator from the entity currently holding the mortgage security. A mortgage putback is most commonly required due to findings of fraudulent or faulty origination documents in which the creditworthiness of the mortgagor or appraised value of the property are misrepresented.
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Investopedia explains 'Mortgage Putback'
Following the collapse of the American real estate market in 2008 and the subsequent financial crises that followed, it was found that mortgages and mortgage-backed securities had been widely dispersed throughout the financial system and that the validity of many mortgages and documents were questionable with regards to lending standards, income verification and appraisal values. Many mortgage security holders demanded mortgage putbacks by mortgage originators who had not completed their due diligence, or in some cases had blatantly defrauded the industry.
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