Mandatory Mortgage Lock

You get a mortgage from First Mortgage Lenders of Main Street Inc. However, they don't intend to keep the mortgage themselves. They're just originating it. They plan to sell it as quickly as possible on the secondary market to HyperGloboFinancial Corp., a massive mortgage aggregator.

These sales of mortgages in the secondary market come in different types. Mandatory mortgage lock describes one of the flavors.

It refers to a scenario in which the seller (First Mortgage Lenders) must deliver the mortgage to the buyer (HyperGloboFinancial) by a certain date. It comes into play in situations where the mortgage transaction doesn't actually close.

If First Mortgage Lenders goes to sell your mortgage before the deal actually closes, a risk exists that the deal will fall through (you won't be able to make your down payment, the house falls into a sinkhole before escrow clears, etc.). A mandatory mortgage lock states that risk in these situations stays with the originator. They have to make good if the mortgage isn't available by the date stated.

The Mandatory Mortgage Lock stands in contrast to the Best Efforts Mortgage Lock. That one just says that an originator has to make their "best effort" to deliver the mortgage they sold on the secondary market. It's a looser standard than the "mandatory" version...the risk falls on the secondary-market buyer, not the seller.