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Mandatory Mortgage Lock

Home Ownership by Country


What is '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.

Explaining '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.


Further Reading


The effectiveness of mandatory mortgage counseling: can one dissuade borrowers from choosing risky mortgages?The effectiveness of mandatory mortgage counseling: can one dissuade borrowers from choosing risky mortgages?
www.nber.org [PDF]
… The legislation set the FICO score threshold for mandatory counseling at 620, with an additional provision that … We obtain our mortgage data from the First American CoreLogic LoanPerformance database on securitized nonprime mortgages (henceforth, the LP data, which …

Consumer confusion in the mortgage market: Evidence of less than a perfectly transparent and competitive marketConsumer confusion in the mortgage market: Evidence of less than a perfectly transparent and competitive market
pubs.aeaweb.org [PDF]
… The legislation set the FICO score threshold for mandatory counseling at 620, with an additional provision that … We obtain our mortgage data from the First American CoreLogic LoanPerformance database on securitized nonprime mortgages (henceforth, the LP data, which …

Peas in a pod? Comparing the US and Danish mortgage finance systemsPeas in a pod? Comparing the US and Danish mortgage finance systems
papers.ssrn.com [PDF]
… The legislation set the FICO score threshold for mandatory counseling at 620, with an additional provision that … We obtain our mortgage data from the First American CoreLogic LoanPerformance database on securitized nonprime mortgages (henceforth, the LP data, which …

Do financial counseling mandates improve mortgage choice and performance? Evidence from a legislative experimentDo financial counseling mandates improve mortgage choice and performance? Evidence from a legislative experiment
www.econstor.eu [PDF]
… The legislation set the FICO score threshold for mandatory counseling at 620, with an additional provision that … We obtain our mortgage data from the First American CoreLogic LoanPerformance database on securitized nonprime mortgages (henceforth, the LP data, which …

Financial Education versus Costly Counseling: How to Dissuade Borrowers from Choosing Risky Mortgages?Financial Education versus Costly Counseling: How to Dissuade Borrowers from Choosing Risky Mortgages?
www.aeaweb.org [PDF]
… The legislation set the FICO score threshold for mandatory counseling at 620, with an additional provision that … We obtain our mortgage data from the First American CoreLogic LoanPerformance database on securitized nonprime mortgages (henceforth, the LP data, which …

The economics of small business finance: The roles of private equity and debt markets in the financial growth cycleThe economics of small business finance: The roles of private equity and debt markets in the financial growth cycle
www.sciencedirect.com [PDF]
… The legislation set the FICO score threshold for mandatory counseling at 620, with an additional provision that … We obtain our mortgage data from the First American CoreLogic LoanPerformance database on securitized nonprime mortgages (henceforth, the LP data, which …

Out of sight, out of mind: Financial illiteracy, inattention, and sluggish mortgage refinancingOut of sight, out of mind: Financial illiteracy, inattention, and sluggish mortgage refinancing
papers.ssrn.com [PDF]
… The legislation set the FICO score threshold for mandatory counseling at 620, with an additional provision that … We obtain our mortgage data from the First American CoreLogic LoanPerformance database on securitized nonprime mortgages (henceforth, the LP data, which …

Three initiatives enhancing the mortgage market and promoting financial stabilityThree initiatives enhancing the mortgage market and promoting financial stability
www.degruyter.com [PDF]
… The legislation set the FICO score threshold for mandatory counseling at 620, with an additional provision that … We obtain our mortgage data from the First American CoreLogic LoanPerformance database on securitized nonprime mortgages (henceforth, the LP data, which …

Peas in a Pod? Comparing the US and Danish Mortgage Finance SystemsPeas in a Pod? Comparing the US and Danish Mortgage Finance Systems
www.jstor.org [PDF]
… The legislation set the FICO score threshold for mandatory counseling at 620, with an additional provision that … We obtain our mortgage data from the First American CoreLogic LoanPerformance database on securitized nonprime mortgages (henceforth, the LP data, which …

Economic and Regulatory Developments Affecting Mortgage Related SecuritiesEconomic and Regulatory Developments Affecting Mortgage Related Securities
heinonline.org [PDF]
… The legislation set the FICO score threshold for mandatory counseling at 620, with an additional provision that … We obtain our mortgage data from the First American CoreLogic LoanPerformance database on securitized nonprime mortgages (henceforth, the LP data, which …



Q&A About Mandatory Mortgage Lock


What does it mean for there to be fewer hedge costs associated with mandatory locks?

There are fewer hedging costs associated with mandatory locks because they have more certainty than best efforts locks.

What is a mandatory mortgage lock?

A mandatory mortgage lock is when the seller of a mortgage in the secondary market has to make delivery by a certain date or pair-out of the trade.

How do you know if you have a best-efforts lock or a mandatory lock?

You can tell if you have a best-efforts lock or not by looking at your contract. If it says that you must deliver on time, then it is likely that you have a mandatory lock. If it says that you will try your best, then it is likely that you have an effortless lock.

Why would someone want to buy an effortless loan instead of one with certainty?

Someone might want an effortless loan because they don't mind waiting until later to get their money back from their investment and they don't want any risk involved in getting their money back earlier than expected. They also might not need all of the money right away and could use some extra cash flow from interest payments while they wait for their loan to mature.

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