Mortgage Fallout

Posted in Finance, Accounting and Economics Terms, Total Reads: 79
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Definition: Mortgage Fallout

Mortgage Fallout is a metric where the originator mortgage loans do not close up or the money borrower is not able to pay the money, and it calculated as a percentage.

It decides the efficiency of an originator if he is able to reduce the falling of mortgage loans, then he is named efficient. For example, if an originator who had 20 open loans and he is not able to close 5 so the fallout would be 25% which is high for an originator. So we can thus make out how efficient the originator is.

Mortgage originator is an individual or an institution who acts as a middleman or a broker and make sure the processes of the mortgage loan is completed. He is in direct contact with the people who wants to take the loan and ensures that all mortgage loans under him get closed.

The borrower has to lock a rate with the mortgage lender, this way there is reduction of risk as a rate of interest is locked and the rate of interest is continued irrespective to the change of interest rate. Thus a hedge is put to ensure the minimization of risk when the current interest rate changes as compared to the interest that is locked by the borrower. Thus this hedge that is this interest rate is applicable till the borrower don’t pay the whole money and there is official transfer of property. Thus the most importing aspect of the originator is to reduce the fallout of mortgage in his pipeline.

Mortgage Fallout the deal is not completed and the loan will fall out from the originator’s pipeline. So thus hedging efficiency of an originator plays an important role in falling out from the pipeline of the originator. Thus loan application can be withdrawn and the loan can fall from the pipeline if the borrower found some better deals.

 

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