Posted on: 22nd Apr, 2007 11:08 pm
what is mortgage cycle
Hi Neer,
Welcome to our forums.
In addition to the borrower and the lender, investors form a major part of the mortgage industry. The investors purchase pools of mortgage loans which lenders offer to borrowers and then sell them into the Wall Street to institutions or individuals who wish to earn by investing into the pools of loan otherwise known as mortgage-backed securities. These institutions or individuals purchase the securities with the aim to earn at a higher interest rate than treasury bonds.
The investors use the sale proceeds to purchase more such mortgage backed securities and are able pay the lenders who sell home loans and make more loans with the money they earn. The entire cycle of originating and selling loans with the involvement of the lender, investor and the Wall Street is known as mortgage cycle.
I hope I have been able to help you with the information. Feel free to come up with further queries.
Thanks :)
Welcome to our forums.
In addition to the borrower and the lender, investors form a major part of the mortgage industry. The investors purchase pools of mortgage loans which lenders offer to borrowers and then sell them into the Wall Street to institutions or individuals who wish to earn by investing into the pools of loan otherwise known as mortgage-backed securities. These institutions or individuals purchase the securities with the aim to earn at a higher interest rate than treasury bonds.
The investors use the sale proceeds to purchase more such mortgage backed securities and are able pay the lenders who sell home loans and make more loans with the money they earn. The entire cycle of originating and selling loans with the involvement of the lender, investor and the Wall Street is known as mortgage cycle.
I hope I have been able to help you with the information. Feel free to come up with further queries.
Thanks :)
Let me add few more things to what Caron said on what actually happens:
Your mortgage along with many others are packaged together by your lender & sold to Fannie Mae or Freddie Mac. After it is sold off to them, lender only receives servicing fee for taking care of the loan and processing payments which you make.
Fannie Mae and Freddie Mac then break these packages into mortgage backed securities and sold off at Wall Street to individuals & institutions. This whole process always keeps on repeating which you can refer to as the mortgage cycle.
Miller
Your mortgage along with many others are packaged together by your lender & sold to Fannie Mae or Freddie Mac. After it is sold off to them, lender only receives servicing fee for taking care of the loan and processing payments which you make.
Fannie Mae and Freddie Mac then break these packages into mortgage backed securities and sold off at Wall Street to individuals & institutions. This whole process always keeps on repeating which you can refer to as the mortgage cycle.
Miller