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Odds Are, Your Mortgage Will Be Sold.

A lender can decide to make money on a particular loan by collecting interest each and every month, or it can sell that loan for a single payment to a willing buyer. That $200,000 loan at 7.00 percent has a potential return of $279,000. That's the value if the loan is held for the full 30 years, which quite frankly doesn't happen that often.

But still, there is considerable value in that note. That's why lenders sell loans. And selling a loan also frees up more money to make yet another mortgage. That process can be repeated over and over again, and in fact often is.

Whether or not a mortgage company sells your loan is purely a business decision, based upon how active that mortgage company is in the market. If a mortgage banker is feeling aggressive about the mortgage market and is ready to make a few bucks, it contacts its legion of loan officers and tells them to go out and sell new loans.

Why do some lenders sell loans, while at the same time others buy them? Why buy a loan when you can just go out and make one instead? The practice of making a mortgage loan is called originating that loan. When a loan officer finds a home loan, that loan is originated by that person.

But that loan officer doesn't come cheap. Nor do the building he works in and the people who help process the loan. Nor does all the insurance the banker pays for along with the electricity bill, payroll, and— well, you get the picture. It costs a lot of money to find a loan. Some lenders will forgo the originating process and simply buy loans from other lenders and collect the monthly interest.

Why the difference? It depends upon a multitude of things, but primarily it rests on the current focus of the lending institution. A mortgage is a solid investment. People will do everything they can to keep their homes by making their payments on time. Banks like that .

This steady rate of return allows banks and other lenders to strategize their business plan. If a lender knows that it will get X percent each and every month, that helps it develop new marketing strategies and provides the stability it needs when it decides to invest in other ventures, such as a shopping center or a small business loan.

It surprises some people to learn that their bank or credit union has sold their loan to someone else, often to someone that they've never heard of. And many times this leaves people feeling that they have been betrayed by their own bank.

In fact, the odds are that your loan will be sold to someone else at some point in time.

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