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?
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A bank is usually good at loaning money. They know how to evaluate risks and set interest rates and such.
After the loan is finished, though, for the next 20-30 years, they’d have to spend time and effort collecting it. That means setting up payments, sending out documents, paying part of the money into an escrow account, using that to pay for insurance and taxes, and all kinds of other stuff. The bank doesn’t want to do that, because it’s all expense with no return.
So the bank sells the loan to another company. That company might not know how to make loans, but they’re good at collecting them. They have a website, and people who spend all day moving numbers around on balance sheets and stuff. They pay the bank a little bit more than the loan is worth, and for the next 20-30 years they’ll take your payments and make a profit.
Sometimes the second company is a bank, and sometimes they’re not. And sometimes that company needs money for something, and they’ll sell some of their loans to another company.
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