Mortgage Allocations
Categories: Mortgage
See: Mortgage.
A mortgage allocation is made when the entity selling mortgage-backed securities spills the deets on the to-be-announced (TBA) market...the market where most conventional mortgages, as well as others, are traded as passthrough securities (pools of mortgages).
Here’s how it goes in the TBA market: a buyer and seller agree on all the details of the contract...things like maturity, price, and the issuer. Because there are so many mortgages and a lot of them are similar to each other, they’re functionally interchangeable.
It’s only after the contract details are confirmed, but before the transaction is settled, when the actual mortgages being included are pegged down and notified from seller to buyer in what’s called a mortgage allocation.
Really makes a mortgage feel special...being so interchangeable.