As long as I’ve owned a home, I’ve had a mortgage. The mortgage I generally have had is usually through whatever lender came through at the time of my home purchase, but isn’t necessarily one of my choosing – it hasn’t mattered much on the company though, because as long as the mortgage rate was what I agreed to, it didn’t matter to me. Within a year or so of buying the home and establishing the mortgage, it always seems that the initial lender “sells” off the mortgage to another institution or bank. When/if that happens, the new company assumes the same terms and my mortgage remains unchanged. Same thing when I have refinance the home – the refinance company comes in with a better rate (used to, at least) and within a short time frame, sells the mortgage off to another company. To make things even stranger, this has happened to me even with an established mortgage of several years with the same company/bank. I can’t fathom why/any benefit the banks get from doing this.
TL;DR: why do banks sell/transfer mortgages around if there is no change to your term? How does it benefit them?
In: 293
When they sell it, they get more money in return than they loaned you.
So if you borrow $300,000 to buy a home, they give you $300,000 and someone might give them $304,000 for the mortgage. And then someone else might give them another $1,500 for the servicing (the right to collect the payments from you and remit the principal and interest to the mortgage owner). Now they’ve made $5,500 for loaning you money for a few days or a week, that ends up being an excellent interest rate.
Servicing gets transferred repeatedly because it’s a bet on how likely you are to refinance your mortgage in the next few years, and different people may have very different views about the odds of that bet.
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