Mortgage Fallout


DEFINITION of 'Mortgage Fallout'

A term used to describe the percentage of loans that do not close in a mortgage originator's pipeline. Mortgage originators adjust the fallout assumptions used in their hedge ratios as interest rates change relative to the loans they have in their pipelines.

BREAKING DOWN 'Mortgage Fallout'

At the same time or shortly after a borrower locks in a mortgage rate with a mortgage lender, the lender typically lays off the risk that current interest rates might change relative to the interest rate given the borrower by putting on a hedge. The hedge is designed to last until the mortgage closes, at which point the mortgage can be sold into the secondary mortgage market and the hedge unwound. However, many loans that are locked in by borrowers do not end up closing. The percentage of loans that do not close after being locked is called fallout. Fallout assumptions are an important part of a mortgage lender's hedging efficiency.

  1. Hedge

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  3. Fallout Risk

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  4. Mortgage Pipeline

    Mortgage loans that have been locked in with a mortgage originator ...
  5. U.S. Savings Bonds

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  6. Coupon

    The annual interest rate paid on a bond, expressed as a percentage ...
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    he When you make a down payment from 3 to 20% of the value of your home and take out a Federal Housing Administration (FHA) ... Read Full Answer >>
  3. How many FHA loans can I have?

    Generally, the Federal Housing Administration (FHA) does not insure more than one mortgage per borrower. This is to prevent ... Read Full Answer >>
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