why does lenders transfer loan/mortgage and what’s in it for them?
In: Economics
Say I am a lender who specializes in originating mortgage loans. I have $1 million dollars to make loans. I can make ten $100K loans, collect the origination fees, and then what do I do? Fire all my mortgage underwriters and wait years to originate any more?
Instead, I pocket the fees, sell the loan to get my capital back, and originate more loans, again and again. I make money off the fees, and off any amount more than the loan amount that I get when selling them (which will depend on the loan’s interest rate and what rates are when I sell it).
People who buy the loans are long term investors wo want a safe long term income stream, either to be included in mortgage backed bonds, or as a direct loan investment by a fund that holds loans.
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