Saturday, June 20, 2009

mortgage bankers

mortgage bankers land funds for home financing.they are not financial intermediaries, however,because they do not accept deposits.they combine a small portion of equity with vast amounts of borrowed capital to originate loans. they then sell the loans as rapidly as possible to institutional investors and secondary mortgage market participants. Thus,they are not portfolio lenders. the home loans originated by mortgage bankers are usually either FHA or VA loans or are conforming loans that meet the purchase requirements of Fannie Mae and Freddie Mac. the guarantee or insurance and underwriting standards for these loan mitigate much of the default risk of home mortgage loans for lenders,allowing the loans to be more easily sold to investors in the secondary market.
The mortgage banking process creates two valuable financial assets:the loan and the rights to service the loan.the loan always is sold,but through a variety of ways.Since the servicing rights are the profit center of mortgage banking, they may be retained or sold,depending partly on the size of the firm.

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