Re: Bank loans question
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Who do these banks sell loans to?
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Big players are Fannie Mae and Freddie Mac.
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Do banks buy loans off each other?
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Sometimes, although much less frequently than from FNMA or FMAC.
Also note that smaller institutions are taking on too much interest rate risk by keeping 30yr or 40yr loans on their books. For example, if interest rates were to skyrocket next year and a small bank is sitting with most of it's assets in 6% mortgages they are doomed.
Instead of holding them, they will sell them and service them (usually for a 0.25% servicing fee). It costs nowhere near .25% to service a mortgage so they make out in fee income.
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