We use cookies to improve security, personalize the user experience,
enhance our marketing activities (including cooperating with our marketing partners) and for other
business use.
Click "here" to read our Cookie Policy.
By clicking "Accept" you agree to the use of cookies. Read less
Understanding Best Efforts Mortgage Lock: A Legal Overview
Definition & Meaning
A best efforts mortgage lock is an agreement in which a mortgage originator commits to making every reasonable attempt to deliver a mortgage to a buyer in the secondary mortgage market. This type of arrangement helps transfer the risk of a loan not closing from the originator to the buyer. Essentially, it allows the originator to secure a commitment from the buyer while minimizing their financial exposure if the loan process encounters issues.
Table of content
Legal Use & context
This term is primarily used in the context of real estate and mortgage financing. It is relevant in transactions involving residential and commercial loans. Best efforts mortgage locks are common in the secondary mortgage market, where loans are sold to investors. Users may encounter this term when dealing with mortgage agreements, refinancing, or selling loans. With the right tools, such as US Legal Forms templates, individuals can manage these processes effectively.
Key legal elements
Real-world examples
Here are a couple of examples of abatement:
Example 1: A mortgage originator agrees to a best efforts mortgage lock for a homebuyer seeking a conventional loan. The originator must make all reasonable attempts to close the loan within a specified period, ensuring the buyer can secure favorable terms.
Example 2: A lender uses a best efforts mortgage lock to sell a pool of loans to an investor, transferring the risk of any loans that do not close successfully. (hypothetical example)
State-by-state differences
Examples of state differences (not exhaustive):
State
Notes
California
Best efforts locks may require specific disclosures to borrowers.
Texas
State regulations may impose additional requirements on mortgage originators.
New York
Best efforts agreements must comply with state lending laws.
This is not a complete list. State laws vary and users should consult local rules for specific guidance.
Comparison with related terms
Term
Definition
Difference
Best efforts mortgage lock
An agreement to make reasonable attempts to deliver a mortgage.
Focuses on risk transfer from originator to buyer.
Mandatory mortgage lock
An obligation to deliver a mortgage regardless of circumstances.
Does not allow for flexibility in delivery attempts.
Common misunderstandings
What to do if this term applies to you
If you are involved in a mortgage transaction with a best efforts mortgage lock, ensure you understand the terms of the agreement. Keep communication open with your mortgage originator and ask questions if something is unclear. You can also explore US Legal Forms' ready-to-use legal form templates to assist with the process. If your situation becomes complex, consider seeking professional legal assistance.
Find the legal form that fits your case
Browse our library of 85,000+ state-specific legal templates.