MORTGAGE MONDAY Why Do Mortgages Get Sold

MORTGAGE MONDAY Why Do Mortgages Get Sold

Mortgages are usually long-term.  20 years.  30 years.  Then why do we pay to one company one month...and then sometimes another company another month?  The below article explains why.  Keep in mind, a lender makes a big difference in getting the deal done.  Feel free to reach out to me at michelleforemanrealtor@gmail.com or www.michelleforemanrealtor.com if you would like some suggestions. 


  • Home mortgages offer a form of investment for traders and speculators.

    Home mortgages offer a form of investment for traders and speculators.


    Your lender agrees to supply the cash for you to buy your home. As part of the lending contract, you, as the borrower, agree to pay interest based on the number of years it takes to repay your loan. You view your mortgage as a way to pay for your home, but investors view your mortgage as a way to earn income from servicing your loan and packaging your loan with other mortgages or other investments as a product to buy, sell and trade to other investors.


    Secondary Mortgage Market


    Mortgage brokers fund loans and then resell the mortgages to large lenders. This resale allows the brokers to make a profit from the sale of the loan and sometimes from the service fee incorporated into the loan payments. Borrowers paying 6 percent interest under this arrangement, for example, remit the full payment each month. The mortgage company keeps a small servicing fee and transfers the remaining payment to the new lender. Investors interested in this arrangement look for highly qualified borrowers with a long history of meeting loan payments and a clear credit report. Brokers typically sell these mortgages during the first few months after closing escrow.


    Fixed-Rate Mortgages


    Some credit unions, savings and loans and lending banks sell their fixed-rate mortgages with low-interest rates to other investors. The banking institutions must balance loans with interest paid on current and future deposits, and selling low-interest mortgages to investors is one way to raise capital. This new capital allows the institution to make new loans at higher loan rates and also pay higher interest rates to depositors. Money used to fund low-interest rate mortgages fails to supply the cash to pay higher interest rates to compete with other savings institutions for depositors.


    Asset-Backed Securities


    Collateralized debt obligations (CDOs) allow investors to buy securities backed by products with cash value. Lenders bundle asset-backed securities, home mortgages in this case packaged as mortgage-backed securities (MBS), into pools along with other assets and market these to investors. Investors find some mortgages made to high-risk borrowers less attractive compared with other mortgages made to more-qualified buyers. Lenders mix borrower types and also mix the mortgages with other securities maturing over a range of years in the CDOs products. This type of mortgage resale allows investors to regulate the cash flowing into portfolios. Investors also buy CDOs believing the return exceeds other types of investments, such as federal Treasury bills.


    Portfolio Balancing


    Banking institutions with a large percentage of investments in delinquent mortgages or loans made to high-risk mortgagees frequently sell these loans to investment companies to remove the risk or the bad debt from the institution's financial books. Banks selling these notes must report the level of risk of the mortgages to the new investors or risk federal fines.


    Joshua Putman Headshot
    Author:
    Phone: 504-339-9219
    Dated: November 23rd 2015
    Views: 587
    About Joshua: Joshua Putman grew up around the world and is now calling Texas home. Serving in the military for mo...

    Property Search








    RSS Feed

    View our latest blog posts in your RSS reader. Click here to access. RSS

    Search Blog

    Recent Blogs

    Jan 17 2017 23576 1 - t is crazy to think that we are alre
    Top Tips For Avoiding Renting Fruad -  These days there seems to be m
    Is This The Year To Move Up To Your Dream Home - It appears that Americans are regain
    Is It Still A Sellers Market In North TX - The market is expected to still con

    Our Bloggers

    Comprar Casa DFW * - 1
    Kim Allman - 5
    Cara Balderas - 30
    Tami Bennett - 45
    Jessica Boozer - 18
    Rhonda Borgne - 1
    Olivia Borowski - 1
    Jennifer Boyd - 2
    Deborah Boyd - 16
    Jamie Brannagan - 1
    Annette Bruen - 20
    Moira Brunken - 11
    Beverly Bryant - 23
    Sherry Cabrera - 359
    Ana Cantu - 1
    Lisa Cardillo - 52
    Bob Cardillo - 4
    Shea Cargile - 12
    Tori Cecil - 3
    Lucina Cervantes - 11
    Troy Copeland - 11
    Gregory Cornett - 2
    Angela Cotten - 56
    Missie Craig - 12
    Greg Cunningham - 2
    Leah Ecob - 15
    Kristine Edens - 3
    Jill Elliott - 99
    Laneal Ernest - 9
    Nicole Espinosa - 27
    Christopher Evans - 1
    Heather Feragotti - 8
    Mark Fischer - 2
    Susan Florsch - 12
    Jennifer Flynn - 6
    Leslie Fogle - 101
    Larry Frassinelli - 6
    Chad Gabriel - 58
    Malci Gariani - 1
    Shalee Garza - 10
    Cassie Gillock - 2
    Ryan Gonzales - 3
    Christina Gonzalez - 5
    Wilma Goodwin - 2
    William Graves - 5
    Sandra Hunt - 70
    Bill Hurd - 3
    Gary Hutchings - 20
    Rachel Jama - 47
    Trenton Johnson - 15
    Felicia Johnson - 78
    Jemi Khan - 26
    Leigh Klotz - 5
    Amber L Johnson - 7
    Michele Lafortune - 22
    Wanda Lewis - 2
    Mark Linder - 1
    Noreen Lodhi - 9
    Stacy Lynn Massar - 27
    Hiwot Melaku - 1
    Jennifer Menting - 17
    Mikki Migis - 8
    Richard Mikus - 1
    Sean Moniri - 21
    Naddia Morales - 10
    Keith Moses - 9
    Mark Mulch - 19
    Erick Murphy - 6
    Steve Murray - 1
    Julie Nicholson - 10
    Nikki Okpuzor - 3
    Alan Oliver - 7
    Kelly Oltmann - 4
    Kaysone Orlando - 1
    Holli Paddio - 3
    Ancy Philips - 7
    JP Piccinini - 48
    Julie Ann Pickering - 85
    Ann-Marie Pope - 2
    Joshua Putman - 111
    Mimi Rader - 1
    Shelia Randolph - 33
    Terri Anne Ray - 1
    Teneka Ray - 1
    Go 2 Girls Realty - 173
    Bethany Rowan - 15
    Kristi Roy - 1
    Kelly Rumney - 9
    Amy Jo Saenz - 3
    Linda Scardis - 4
    Sandy Setliff - 209
    Christine Shannon - 29
    Rene Sinclair - 27
    Shelby Smith - 3
    Bryce Smith - 5
    Monica Solkhon - 1
    Rodrigo Sotomayor - 16
    Brent Stack - 1
    Jenna Stanley - 9
    Kelley Stubbs - 3
    Melodie Sulgrove - 1
    Seana Taylor - 205
    Mary Taylor - 14
    Julian Taylor - 17
    Erica Taylor - 40
    Angela Taylor - 1
    Karla Terrell - 2
    Joey Thomas - 2
    Jason Todd - 24
    Andrea Trimble - 55
    Miguel Umana - 6
    Staci Van Allen - 12
    Diane Velez - 17
    Debbie Viverito - 132
    Nick Walton - 75
    Spring Weeks - 8
    Michael Worley - 160
    Keisha York - 30
    Debbie Zurita - 17

    Saved Properties

    This is a list of your favorite properties. We will email you if a property is reduced or leaves the market.

    Click 'Save' to add a property to this list.

    Register / Login

    New & returning visitors please enter your information to login.

    By clicking 'register' you are agreeing to our terms of use & giving us expressed written consent to contact you.

    Questions? Comments? Complaints?

    This message will go directly to the head of our team.

    Location & Address

    JP And Associates REALTORS
    6175 Main Street #355 Frisco Texas 75034
    Frisco, TX
    972-375-9448
    4692875503

    Other Locations