We are independent & ad-supported. We may earn a commission for purchases made through our links.
Advertiser Disclosure
Our website is an independent, advertising-supported platform. We provide our content free of charge to our readers, and to keep it that way, we rely on revenue generated through advertisements and affiliate partnerships. This means that when you click on certain links on our site and make a purchase, we may earn a commission. Learn more.
How We Make Money
We sustain our operations through affiliate commissions and advertising. If you click on an affiliate link and make a purchase, we may receive a commission from the merchant at no additional cost to you. We also display advertisements on our website, which help generate revenue to support our work and keep our content free for readers. Our editorial team operates independently of our advertising and affiliate partnerships to ensure that our content remains unbiased and focused on providing you with the best information and recommendations based on thorough research and honest evaluations. To remain transparent, we’ve provided a list of our current affiliate partners here.
Finance

Our Promise to you

Founded in 2002, our company has been a trusted resource for readers seeking informative and engaging content. Our dedication to quality remains unwavering—and will never change. We follow a strict editorial policy, ensuring that our content is authored by highly qualified professionals and edited by subject matter experts. This guarantees that everything we publish is objective, accurate, and trustworthy.

Over the years, we've refined our approach to cover a wide range of topics, providing readers with reliable and practical advice to enhance their knowledge and skills. That's why millions of readers turn to us each year. Join us in celebrating the joy of learning, guided by standards you can trust.

What Is a Mortgage Put-Back?

Jim B.
By
Updated: May 17, 2024
Views: 4,544
Share

A mortgage put-back occurs when an entity, usually a mortgage lender like a bank, is forced to buy back a mortgage that it had sold to a third party as an investment security. This happens because the lender has failed to meet certain specifications regarding the original loan. As a result, the third-party buyer is often stuck with a useless investment vehicle, since the chances of the original mortgage loan being paid back are slim. Lenders can avoid the possibility of a mortgage put-back by following proper lending guidelines and making sure that the borrowers are reliable enough to pay back the original loan.

Mortgages are given by banks and other institutional lenders as loans to homeowners, who pay back the cost of the loan in installments and interest payments until the home in question is paid off. Banks and other lenders often resell these mortgage loans, usually packaged together, as investment securities in the secondary market. Should the homeowner default on mortgage payments, the burden suddenly falls on the investor that purchased the mortgage from the lender. Such a situation often necessitates a mortgage put-back from a lender.

When a mortgage put-back is ordered, it is usually by some regulatory body that devotes itself to investment securities. If this regulatory body finds that lenders have been involved in deceptive practices regarding home loans and then sold these loans off to other investors, it may decide that a put-back is warranted. In this case, the lender reassumes responsibility for the loan.

It is important to note that a mortgage put-back may only be in the offing if the lender was proven to act in a manner that failed to live up to industry standards. All investments have risks involved, and an investor cannot demand a put-back simply because an investment in secondary market mortgages doesn't live up to expectations. In addition, if there is a chance that the loan may still be recovered, even partially, investors might not be able to get the full value of the mortgage in a put-back.

Mortgage lenders who are forced to repurchase mortgages in a mortgage put-back generally have either been negligent or even unscrupulous in their dealings. For instance, lenders forced to make a put-back might have been found to have lied on house appraisals. They may also have preyed on poorer members of society with high-interest loans that the borrowers couldn't possibly pay back. Whatever the circumstance, a put-back can cause significant damage to a lending bank, which in turn can harm the economy at large.

Share
WiseGeek is dedicated to providing accurate and trustworthy information. We carefully select reputable sources and employ a rigorous fact-checking process to maintain the highest standards. To learn more about our commitment to accuracy, read our editorial process.
Jim B.
By Jim B.
Freelance writer - Jim Beviglia has made a name for himself by writing for national publications and creating his own successful blog. His passion led to a popular book series, which has gained the attention of fans worldwide. With a background in journalism, Beviglia brings his love for storytelling to his writing career where he engages readers with his unique insights.

Editors' Picks

Discussion Comments
Jim B.
Jim B.
Freelance writer - Jim Beviglia has made a name for himself by writing for national publications and creating his own...
Learn more
Share
https://www.wisegeek.net/what-is-a-mortgage-put-back.htm
Copy this link
WiseGeek, in your inbox

Our latest articles, guides, and more, delivered daily.

WiseGeek, in your inbox

Our latest articles, guides, and more, delivered daily.