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
It benefits them in three ways:
1) It is a “cash now for value later” proposition. The investors buying the loan are paying the bank money right now so that they can own the value of your loan’s maturity.
2) It takes the risk off of their books. While loans are listed as an asset to be repaid, they inherently carry risk, and so for a bank to sell your loan means that it turns from an asset with risk to cash on hand.
3) The investors often will package loans into financial instruments to resell to other investors, thus reducing the risk and increasing the value of the loan/investment as a whole.
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