Essentials of Mortgage Loan

Mortgage Loan Facts


Secondary Market Activities

Loans made by mortgage bankers are customarily resold to other lenders and investors in the resale market known as the secondary market. Mortgage loan bankers are engaged in the primary mortgage market when making the loan and in the secondary mortgage market in the sale of the loan.

Many of the loans made by mortgage bankers are made for particular investors such as other lenders and pension plans. They will make the loans to meet the lending criteria desired by this particular investor. Much of their activities deal with out-of-state lenders and investors who desire to make long-term loans secured by California real estate. Because of the size of our real estate market, California mortgage bankers can assemble packages of trust deeds of significant value.

Types of Property

Most mortgage bankers deal primarily in residential property, the majority of which is single-family dwellings. However, some mortgage bankers handle a variety of property and might specialize in large commercial or industrial loans. They work with lenders who desire the highest interest possible from this type of loan.

Portfolio Loans

Portfolio loans are loans held by a lender as an investment. It is rare for a mortgage banker to tie up capital in a portfolio of loans. Lending is a capital intensive activity that requires a great deal of capital or the availability of such capital.

Servicing Loans

Mortgage bankers generally want to service the loans they make and resell. Servicing loans doing the accounting necessary for a loan. The one-quarter percent to one-half percent service fee can be a significant profit center for the mortgage banker when thousands of loans are serviced.

With today's computer-servicing programs, servicing loans is no longer the labor-intensive activity that it was just two decades ago. Errors in computations have been virtually eliminated.
An advantage of servicing the loans is the control of impound accounts for taxes and insurance when it is collected in advance with loan payments. These funds, when deposited in a bank give a mortgage banker tremendous clout when they are borrowers from banks holding such funds. They are able to borrow funds at extremely attractive interest rates.
Speculating


Mortgage bankers, like commercial bankers, speculate on interest rates, if a mortgage banker believes that interest rates will rise, the mortgage banker will want to resell loans in the shortest possible time. Should rates rise, the value of loans held at below-market rates of interest will fall. Such loans will have to be sold at a discount from face value unless the mortgage banker has a firm purchase commitment from an investor.

If a mortgage banker believes that interest rates will fall, he or she will want to hold as large a loan inventory as possible.

The mortgage banker might not want to enter into firm agreement for the resale of such loans. If rates do fail, the higher interest mortgages will be more valuable on the secondary mortgage market and should sell at a premium to face value.

The top mortgage brokers will help you find the best mortgage lender so you can buy your dream home. You will learn more about mortgage on several mortgage sites online.