@saillakeerie, Are banks holding the loans or are banks selling the loans?
Are banks borrowing short term and lending longer term?
Residential mortgages are securitized in loan pools. Servicing is retained, often by the originating lender, so to the borrower it doesn’t seem as if the loan has been sold. Everyone I know tells me that their loan is still owned by the original lender, Wells Fargo or Citibank or small town bank. Well, since 65% or more of home mortgage loans are securitized, I think some of those making the claim that their loan is still owned by the originator are incorrect.
@twoinanddone, thanks.
I don’t want to see banks borrowing short term and lending long term and keeping the loans. If we ever normalize, that is a disaster.
Loans I see are held and serviced by the banks. And are pretty much all 2-5 years. Real estate loans tend to have longer maturities. Commercial loans tend to be held by the banks.
Do Commercial loans have variable rates?
Most commercial loans are based on prime or LIBOR so they are variable. And banks typically either sell fixed rate loans or hedge against interest rate changes.
Lenders must tell consumer borrowers if they intend to/may assign the loan (almost all of them so inform borrowers because the notice doesn’t require assignment). Its typically a document that is part of the closing package. Wouldn’t be surprising that people don’t pay attention to it because a lot of people don’t read what they sign. Lenders also must give notices to consumer borrowers when the loan is actually sold. Again not a surprise if people don’t pay attention (and as a practical matter who holds the paper doesn’t really matter for most people because they pay the servicer (almost always the originating lender) and never need to contact the holder of the paper.
Who held the paper was problematic with the crash because in most/many states, to foreclose a lender must be the secured party/mortgagee of record. Typically assignments are not recorded because being the secured party/mortgagee of record doesn’t matter if the loan is paid on time (no need to incur the costs of recording if its not relevant). But when there are problems, you need to trace the chain of title if you will to the paper. With all of the securitizations/sales/assignments, producing that paper trail was sometimes difficult.
Those notices @saillakeerie refers to are something like ‘wells Fargo mortgage has sold your loan to WF Mortgage Holding. Make your payments to WFM’ People don’t notice the notice. Once the loan is sold, they do not notify you every time it is moved from one securitized pool to another.
65% of home mortgages and deeds of trust were registered under MERS at one time, an electronic system that allows the paper to be sold and resold without refilling the security document. It was supposed to make it easier, but really didn’t if you are the one at the end of the chain of title trying to figure out who owned the damned mortgage.