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.
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Finance: What is the Difference Between ...257 Views
Finance, a la shmoop. what it's the difference between fixed and variable
costs? all right welcome on people nothing was broken so nothing had to be
fixed. a fixed cost means that it's like fixed in place- like the steely-eyed gaze [man cries as dollar bill is torn in half]
of Ahab here. a fixed cost is one that you incur whether you sell one unit of a
widget or a million units. variable costs well they vary. they change. think about
the cost of the plastic that goes into each widget. sell only one widget and
well your plastics bill is pretty low. sell a million widgets and it likely costs
a lot to buy the raw plastics will make them widgets right? but okay that's the [kid grins holding stack of plastic toys]
bird's eye view .what time is it? yes example time! okay you own an absinthe
stand called absinthe Pete's. yeah it's a 1925 and people are bored in order to
sell the absinthe you had to have an absinthe from milking factory, which cost
you 400 bucks to build. its 1925 so things are you know cheaper. and deadlier.
all right well that 400 bucks for the factory is a fixed cost. you have to
spend it whether you sell one glass of absinthe or a zillion. without the absent
from milker you have nothing to sell. so you also have to pay 50 bucks a month to [men negotiate]
rent the land on which that factory sits that $50 rent is a fixed recurring cost.
your cost of rent doesn't change whether you sell one gallon of gentleman Pete's
aged reserve or 10,000 gallons of it, you still pay that 50 bucks a month to rent
the land. fixed recurring cost. all right so what's variable. well the Absinthe
itself costs you two cents a cup and you sell it for a nickel. the Absinthe can be
stored basically forever before it goes bad ,you know it's poison so like what [Absinthe with a loaf of bread]
would you expect? that it go bad ?like what what is bad?
well so the cost of producing the Absinthe itself is variable.
if you don't sell any in April the cruelest month ,then you have no variable
cost of absinthe. got it that is the cost of absinthe was zero because you sold
none just keep it in the inventory for next month. if you sell 5000 drinks at 2
cents a drink in may to help people go away, well then your cost varied that
month from zero in April the cruelest month, the 5000 times 2 cents or a
hundred bucks in May. the cost of the absinthe itself is variable. and that's
it. fixed costs are set and don't change. they're fixed in position that can be
one-time fixed charges like the cost of building the factory, and they can be
recurring fixed charges like the cost of that monthly rent .it's the same amount [factory being built]
each month, so it's fixed but it recurs. and then there's variable costs. those
change with output or production levels or changes in the business environment
like if suddenly the food that an absinthe eats gets more expensive. well
then you could be producing the same volumes but each unit of that volume
would vary in costing you more to produce .and trust us when you're dealing
with absinthe it always ends up costing you the next morning. yeah drink plenty [man falls over after drinking several bottles of absinthe]
of water with that.
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