The Mortgae Money Cycle.

By
Real Estate Agent with Boise Property

You can go to any bank or mortgage p and apply for a loan but did you know that in many cases they are not lending you their own money? Most of the money for home loans comes from three major institutions:

  • Fannie Mae (FNMA - Federal National Mortgage Association)
  • Freddie Mac (FHLMC - Federal Home Loa Mortgage Corporation)
  • Ginnie Mae (GNMA - Government National Mortgage Association)

 There are mortgage Originating Companies and Mortgage Servicing Companies.

Here's how it works:

Originators collect the required documentation, perform the processing and underwriting and eventually you own the house.  You might be making payments to the company who originated your loan, or your loan might have been transferred to another institution.

The company you make your payments to very rarely owns your loan. They are the "servicer" of your mortgage. They are called the servicer because they are simply "servicing" your loan for the institution that does own it.

The mortgage lenders frequently package loans into a "pool" with a lot of other loans and will sell these pools to one of the three institutions listed above. The servicer of your loan gets a monthly fee from the investor for processing payments and taking care of your loan. This fee is usually only about 3/8ths of a percent but these companies service hundreds of thousands of loans and make their profit in volume.

Mortgage servicing is frequently where lenders make the real money. The entire system of originating mortgages, including wholesale lenders and mortgage brokers is designed so that servicers get loans into their portfolio -- hopefully at a "break even" level -- but often at a loss. Mortgage servicing is where they make their profit.

Once your loan has been packaged into a pool and sold to Fannie Mae, Freddie Mac, or Ginnie Mae, the lender gets additional funds so they can make more loans (to service in their portfolio) and sell to those institutions, so they can get more money, and so on...

This is the cycle that allows institutions to lend you money. 

www.BuyandSellinIdaho.com     www.MyBoiseHomeLoans.com

This blog's intention is to provide inspirational stories as well as historical accounts and insight into matters concerning the Boise home loan and Boise real estate markets. These are my opinions and should not be regarded as factual data.

Comments (1)

Jim Paulson
Progressive Realty (Boise Idaho) www.Progressive-Realty.info - Boise, ID
Owner,Broker

It was nice getting a chance to talk to you and your husband a few weeks ago at the BBQ.

 

I am hoping that the new group that I started will gain more traction so all of our posts will get more activity.  Please consider starting to post your localized blogs to this site as one of your “groups” instead of the current "Boise Idaho Real Estate" group so we can work on getting more of your blogs featured in the future!  There were only 19 subscribers to this group so I will be contacting each of them to let them know my objective.  http://activerain.com/groups/BoiseRealEstate

 

Sep 03, 2010 05:36 AM