In a price risk situation if customers withdraw their applications a bank may be unable to originate enough loans to meet its forward sales commitments .Because of this kind of "Fallout" a bank may have to purchase additional loans in the secondary market at prices higher than anticipated. Alternatively, a bank may choose to liquidate its commitment to sell and deliver mortgages by paying a fee to the counterparty commonly called a ______________.

Question

Quizplus · Accepted Answer

A "Pair-off arrangement" is a fee paid to the counterparty to liquidate a commitment to sell and deliver mortgages.

In a Price Risk Situation If Customers Withdraw Their Applications