First Funding Blog

Mandatory Delivery Pricing

Mandatory Delivery pricing generally means that the Correspondent Lender assumes the financial risk of not satisfying the delivery of a given loan, or pool of loans. The financial risk most often manifests itself via a specified penalty or penalty formula which defines the amount that the Correspondent Lender owes the Secondary Market Mortgage Investor in the event that the Mandatory Delivery contract requirements are not met by the deadline specified. Mandatory Delivery mechanisms can be very complex and they can create significant risk for the Correspondent Lender, but they can also be a useful pricing tool for sophisticated Correspondent Lenders.