What incentives do banks have to gather up loans into pools (backed by Ginnie Mae)and selling them?What is...
Crontab: Ubuntu running script (noob)
Am I a Rude Number?
How can prove this integral
Why is working on the same position for more than 15 years not a red flag?
What incentives do banks have to gather up loans into pools (backed by Ginnie Mae)and selling them?
Words and Words with "ver-" Prefix
How can a large fleets maintain formation in interstellar space?
How does Leonard in "Memento" remember reading and writing?
Cookies - Should the toggles be on?
"on its way" vs. "in its way"
How can I remove (non-trivial) duplicates from a VCF file?
What is the proper way to reproach a rav?
How would an AI self awareness kill switch work?
Do theoretical physics suggest that gravity is the exchange of gravitons or deformation/bending of spacetime?
Why publish a research paper when a blog post or a lecture slide can have more citation count than a journal paper?
Why do neural networks need so many training examples to perform?
Early credit roll before the end of the film
Increment each digit in a number to form a new number
How much mayhem could I cause as a sentient fish?
Why is it that Bernie Sanders is always called a "socialist"?
Cat is tipping over bed-side lamps during the night
When can a QA tester start his job?
Why was Lupin comfortable with saying Voldemort's name?
Consequences of lack of rigour
What incentives do banks have to gather up loans into pools (backed by Ginnie Mae)and selling them?
What is the difference between Freddie Mac, Fannie Mae and Ginnie Mae?How do credit card balances relate to getting a Mortgage?Is it possible to get a loan when you own a significant portion of a business that is taking investment?Accepting a deposit into my mortgage from a third party and paying them interestMortgage change of terms (lower rate) increases payment amountsQuestion about MBS and how it paysEscrow Removal Fee?Can I pay off a portion of my lease to increase mortgage approval amountBest Practices for Buying a House?How do owners of one home make money on the sell-and-buy process?
This is a two part question:
1) I understand that there are certain mortgage loans that when originated by banks can be gathered up into pools and then "sold" to investors, and that these pools are backed by Ginnie Mae, in the sense that, if the borrowers are unable to make payments, and the banks that originated them are also unable to make make payments, then Ginnie Mae would step in and make the payment.
My first question is about the banks. What incentive do they have to gather up the loans in pools and sell them to investors? Because the payments made are not ending up in their pockets, but that of the investors instead.
2) Secondly, I've read that, in this process, Ginnie Mae collects a fee (of a max of 6 basis points). Who is this "fee" levied upon?
I hope my questions aren't too naive and simple to understand. Thanks!
mortgage mortgage-rate
asked 2 hours ago
ricksanchezricksanchez
111
New contributor
ricksanchez is a new contributor to this site. Take care in asking for clarification, commenting, and answering.
Check out our Code of Conduct.
add a comment |
This is a two part question:
1) I understand that there are certain mortgage loans that when originated by banks can be gathered up into pools and then "sold" to investors, and that these pools are backed by Ginnie Mae, in the sense that, if the borrowers are unable to make payments, and the banks that originated them are also unable to make make payments, then Ginnie Mae would step in and make the payment.
My first question is about the banks. What incentive do they have to gather up the loans in pools and sell them to investors? Because the payments made are not ending up in their pockets, but that of the investors instead.
2) Secondly, I've read that, in this process, Ginnie Mae collects a fee (of a max of 6 basis points). Who is this "fee" levied upon?
I hope my questions aren't too naive and simple to understand. Thanks!
mortgage mortgage-rate
asked 2 hours ago
ricksanchezricksanchez
111
New contributor
ricksanchez is a new contributor to this site. Take care in asking for clarification, commenting, and answering.
Check out our Code of Conduct.
add a comment |
This is a two part question:
1) I understand that there are certain mortgage loans that when originated by banks can be gathered up into pools and then "sold" to investors, and that these pools are backed by Ginnie Mae, in the sense that, if the borrowers are unable to make payments, and the banks that originated them are also unable to make make payments, then Ginnie Mae would step in and make the payment.
My first question is about the banks. What incentive do they have to gather up the loans in pools and sell them to investors? Because the payments made are not ending up in their pockets, but that of the investors instead.
2) Secondly, I've read that, in this process, Ginnie Mae collects a fee (of a max of 6 basis points). Who is this "fee" levied upon?
I hope my questions aren't too naive and simple to understand. Thanks!
mortgage mortgage-rate
asked 2 hours ago
ricksanchezricksanchez
111
New contributor
ricksanchez is a new contributor to this site. Take care in asking for clarification, commenting, and answering.
Check out our Code of Conduct.
This is a two part question:
1) I understand that there are certain mortgage loans that when originated by banks can be gathered up into pools and then "sold" to investors, and that these pools are backed by Ginnie Mae, in the sense that, if the borrowers are unable to make payments, and the banks that originated them are also unable to make make payments, then Ginnie Mae would step in and make the payment.
My first question is about the banks. What incentive do they have to gather up the loans in pools and sell them to investors? Because the payments made are not ending up in their pockets, but that of the investors instead.
2) Secondly, I've read that, in this process, Ginnie Mae collects a fee (of a max of 6 basis points). Who is this "fee" levied upon?
I hope my questions aren't too naive and simple to understand. Thanks!
mortgage mortgage-rate
mortgage mortgage-rate
asked 2 hours ago
ricksanchezricksanchez
111
New contributor
ricksanchez is a new contributor to this site. Take care in asking for clarification, commenting, and answering.
Check out our Code of Conduct.
asked 2 hours ago
ricksanchezricksanchez
111
New contributor
ricksanchez is a new contributor to this site. Take care in asking for clarification, commenting, and answering.
Check out our Code of Conduct.
asked 2 hours ago
ricksanchezricksanchez
111
New contributor
ricksanchez is a new contributor to this site. Take care in asking for clarification, commenting, and answering.
Check out our Code of Conduct.
asked 2 hours ago
ricksanchezricksanchez
111
asked 2 hours ago
ricksanchezricksanchez
111
111
New contributor
ricksanchez is a new contributor to this site. Take care in asking for clarification, commenting, and answering.
Check out our Code of Conduct.
New contributor
ricksanchez is a new contributor to this site. Take care in asking for clarification, commenting, and answering.
Check out our Code of Conduct.
ricksanchez is a new contributor to this site. Take care in asking for clarification, commenting, and answering.
Check out our Code of Conduct.
add a comment |
add a comment |
1 Answer
1
active
oldest
votes
Say I can lend money at a 10% rate. I lend you $10,000 and the note is for $11,000 due in one year. But, the next day, I can sell the note for $10,100, the buyer willing to get a return of 8.9%. ($11K/$10.1K). Why would I lend that $10K for a year, when I can turn over the loan and make 1% in a day?
The mortgage is more complex, of course. But the concept is similar. Underwriting the loan and selling it into a package (CMOs or Collateralized Mortgage Obligations) lets a small bank help their customer get the mortgage, but not have their funds tied up for decades. At the other end, are investors who can get a return on their money closer to the rate on long term loans.
The concept itself is sound so long at ethical underwriting is maintained, i.e. 20% down, 28/36 debt to income limits, etc. The market blew up when this was ignored, not because the premise was faulty.
answered 1 hour ago
JoeTaxpayer♦JoeTaxpayer
144k22231464
add a comment |
Your Answer
StackExchange.ready(function() {
var channelOptions = {
tags: "".split(" "),
id: "93"
};
initTagRenderer("".split(" "), "".split(" "), channelOptions);
StackExchange.using("externalEditor", function() {
// Have to fire editor after snippets, if snippets enabled
if (StackExchange.settings.snippets.snippetsEnabled) {
StackExchange.using("snippets", function() {
createEditor();
});
}
else {
createEditor();
}
});
function createEditor() {
StackExchange.prepareEditor({
heartbeatType: 'answer',
autoActivateHeartbeat: false,
convertImagesToLinks: true,
noModals: true,
showLowRepImageUploadWarning: true,
reputationToPostImages: 10,
bindNavPrevention: true,
postfix: "",
imageUploader: {
brandingHtml: "Powered by u003ca class="icon-imgur-white" href="https://imgur.com/"u003eu003c/au003e",
contentPolicyHtml: "User contributions licensed under u003ca href="https://creativecommons.org/licenses/by-sa/3.0/"u003ecc by-sa 3.0 with attribution requiredu003c/au003e u003ca href="https://stackoverflow.com/legal/content-policy"u003e(content policy)u003c/au003e",
allowUrls: true
},
noCode: true, onDemand: true,
discardSelector: ".discard-answer"
,immediatelyShowMarkdownHelp:true
});
}
});
ricksanchez is a new contributor. Be nice, and check out our Code of Conduct.
Sign up or log in
StackExchange.ready(function () {
StackExchange.helpers.onClickDraftSave('#login-link');
});
Sign up using Google
Sign up using Facebook
Sign up using Email and Password
Post as a guest
Required, but never shown
StackExchange.ready(
function () {
StackExchange.openid.initPostLogin('.new-post-login', 'https%3a%2f%2fmoney.stackexchange.com%2fquestions%2f105843%2fwhat-incentives-do-banks-have-to-gather-up-loans-into-pools-backed-by-ginnie-ma%23new-answer', 'question_page');
}
);
Post as a guest
Required, but never shown
1 Answer
1
active
oldest
votes
1 Answer
1
active
oldest
votes
active
oldest
votes
active
oldest
votes
Say I can lend money at a 10% rate. I lend you $10,000 and the note is for $11,000 due in one year. But, the next day, I can sell the note for $10,100, the buyer willing to get a return of 8.9%. ($11K/$10.1K). Why would I lend that $10K for a year, when I can turn over the loan and make 1% in a day?
The mortgage is more complex, of course. But the concept is similar. Underwriting the loan and selling it into a package (CMOs or Collateralized Mortgage Obligations) lets a small bank help their customer get the mortgage, but not have their funds tied up for decades. At the other end, are investors who can get a return on their money closer to the rate on long term loans.
The concept itself is sound so long at ethical underwriting is maintained, i.e. 20% down, 28/36 debt to income limits, etc. The market blew up when this was ignored, not because the premise was faulty.
answered 1 hour ago
JoeTaxpayer♦JoeTaxpayer
144k22231464
add a comment |
Say I can lend money at a 10% rate. I lend you $10,000 and the note is for $11,000 due in one year. But, the next day, I can sell the note for $10,100, the buyer willing to get a return of 8.9%. ($11K/$10.1K). Why would I lend that $10K for a year, when I can turn over the loan and make 1% in a day?
The mortgage is more complex, of course. But the concept is similar. Underwriting the loan and selling it into a package (CMOs or Collateralized Mortgage Obligations) lets a small bank help their customer get the mortgage, but not have their funds tied up for decades. At the other end, are investors who can get a return on their money closer to the rate on long term loans.
The concept itself is sound so long at ethical underwriting is maintained, i.e. 20% down, 28/36 debt to income limits, etc. The market blew up when this was ignored, not because the premise was faulty.
answered 1 hour ago
JoeTaxpayer♦JoeTaxpayer
144k22231464
add a comment |
Say I can lend money at a 10% rate. I lend you $10,000 and the note is for $11,000 due in one year. But, the next day, I can sell the note for $10,100, the buyer willing to get a return of 8.9%. ($11K/$10.1K). Why would I lend that $10K for a year, when I can turn over the loan and make 1% in a day?
The mortgage is more complex, of course. But the concept is similar. Underwriting the loan and selling it into a package (CMOs or Collateralized Mortgage Obligations) lets a small bank help their customer get the mortgage, but not have their funds tied up for decades. At the other end, are investors who can get a return on their money closer to the rate on long term loans.
The concept itself is sound so long at ethical underwriting is maintained, i.e. 20% down, 28/36 debt to income limits, etc. The market blew up when this was ignored, not because the premise was faulty.
answered 1 hour ago
JoeTaxpayer♦JoeTaxpayer
144k22231464
Say I can lend money at a 10% rate. I lend you $10,000 and the note is for $11,000 due in one year. But, the next day, I can sell the note for $10,100, the buyer willing to get a return of 8.9%. ($11K/$10.1K). Why would I lend that $10K for a year, when I can turn over the loan and make 1% in a day?
The mortgage is more complex, of course. But the concept is similar. Underwriting the loan and selling it into a package (CMOs or Collateralized Mortgage Obligations) lets a small bank help their customer get the mortgage, but not have their funds tied up for decades. At the other end, are investors who can get a return on their money closer to the rate on long term loans.
The concept itself is sound so long at ethical underwriting is maintained, i.e. 20% down, 28/36 debt to income limits, etc. The market blew up when this was ignored, not because the premise was faulty.
answered 1 hour ago
JoeTaxpayer♦JoeTaxpayer
144k22231464
answered 1 hour ago
JoeTaxpayer♦JoeTaxpayer
144k22231464
answered 1 hour ago
JoeTaxpayer♦JoeTaxpayer
144k22231464
answered 1 hour ago
JoeTaxpayer♦JoeTaxpayer
144k22231464
144k22231464
add a comment |
add a comment |
ricksanchez is a new contributor. Be nice, and check out our Code of Conduct.
ricksanchez is a new contributor. Be nice, and check out our Code of Conduct.
ricksanchez is a new contributor. Be nice, and check out our Code of Conduct.
ricksanchez is a new contributor. Be nice, and check out our Code of Conduct.
Thanks for contributing an answer to Personal Finance & Money Stack Exchange!
- Please be sure to answer the question. Provide details and share your research!
But avoid …
- Asking for help, clarification, or responding to other answers.
- Making statements based on opinion; back them up with references or personal experience.
To learn more, see our tips on writing great answers.
Sign up or log in
StackExchange.ready(function () {
StackExchange.helpers.onClickDraftSave('#login-link');
});
Sign up using Google
Sign up using Facebook
Sign up using Email and Password
Post as a guest
Required, but never shown
StackExchange.ready(
function () {
StackExchange.openid.initPostLogin('.new-post-login', 'https%3a%2f%2fmoney.stackexchange.com%2fquestions%2f105843%2fwhat-incentives-do-banks-have-to-gather-up-loans-into-pools-backed-by-ginnie-ma%23new-answer', 'question_page');
}
);
Post as a guest
Required, but never shown
Sign up or log in
StackExchange.ready(function () {
StackExchange.helpers.onClickDraftSave('#login-link');
});
Sign up using Google
Sign up using Facebook
Sign up using Email and Password
Post as a guest
Required, but never shown
Sign up or log in
StackExchange.ready(function () {
StackExchange.helpers.onClickDraftSave('#login-link');
});
Sign up using Google
Sign up using Facebook
Sign up using Email and Password
Post as a guest
Required, but never shown
Sign up or log in
StackExchange.ready(function () {
StackExchange.helpers.onClickDraftSave('#login-link');
});
Sign up using Google
Sign up using Facebook
Sign up using Email and Password
Sign up using Google
Sign up using Facebook
Sign up using Email and Password
Post as a guest
Required, but never shown
Required, but never shown
Required, but never shown
Required, but never shown
Required, but never shown
Required, but never shown
Required, but never shown
Required, but never shown
Required, but never shown
