Fallout is one of the most critical elements of any hedging model. Its impact on the mortgage position can be crucial to the ultimate profitability of a mortgage company.

Most mortgage bankers talk about fallout when discussing the management of their mortgage origination business, but few have an adequate grasp as to what fallout is, how it is calculated, where these numbers can be used to manage risk, and why they need to do so in the first place.

Extreme interest rate movements contribute to foregone interest income, decreased asset values, increased liability costs, and increased exposure during loan commitment periods.

Regardless of interest rates, it is a solid practice for mortgage lender, builders and borrowers to continually look for ways to remove contingent liabilities to decrease risk

The difference between a highly profitable mortgage lender and a mediocre one sometimes comes down to the methods and tools used to minimize risk and decrease liability.

The best efforts approach can be defined as the delivery of loans to an investor at a predetermined price within a specific time period upon closing with a mortgage banker.

Much like the hard-money lending industry, mortgage servicing also began as a cottage industry reserved for just a few ultra-large lenders.