Banks Selling Mortgages
Banks make money selling mortgages by collecting interest payments over time. They also earn commissions when they sell the mortgages to investors, freeing up money for banks to issue new loans.
Interest Rates on Mortgages
When you take out a mortgage, interest is added on top of the loan amount. This interest is included in your monthly repayments. The interest rate can be fixed or variable.
Process of Selling Mortgages
- Banks sell mortgages to free up credit, lend money to more borrowers, and earn fees.
- Investors like pensions and mutual funds buy bundled mortgages from banks.
- When a bank sells your mortgage, they are mainly selling the servicing rights.
Notification When Selling Mortgages
Lenders must notify you when they sell your mortgage. The new servicer has 15 days to notify you, while a new owner has 30 days. You can also request information on who owns your mortgage.
Reasons for Selling Mortgages
Banks sell mortgages to free up capital, manage interest rate risk, and generate profits. It is a strategic decision undertaken for various reasons.
Secondary Mortgage Market
The secondary mortgage market exists as a source of money for banks to lend out to home buyers in every state. This is done by paying cash for mortgages purchased from lenders and holding those mortgages in Fannie Mae’s investment portfolio.
Mortgage Investors and Profit
Mortgage investors purchase mortgages from lenders or originate mortgage loans directly. Banks profit from mortgages by collecting interest payments and selling mortgages to investors, providing instant cash instead of waiting to collect interest over years.