why does lenders transfer loan/mortgage and what’s in it for them?
In: Economics
Some lenders really specialize in acquisition but don’t really want to hold the mortgage long-term. There’s a lot less risk in getting someone to sign a mortgage but then lay it off to someone else (at a reduced value) for the long-term.
You lose out on collecting on the mortgage for the next 30 years, but, you also don’t have to deal with the risk that the borrower will default.
Even if a lender does want to hold on to a mortgage for the full term, they will still seek to balance their portfolio, not too much commercial lending, etc.
There is still value in closing the loan because the initial lender gets the points from the transaction and a fraction of the long-term interest in the sale to the other lender.
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