7 ms·
> The nightmare scenario for a financial institution is someone getting a mortgage, paying it off early, and not getting another mortgage. This is only true pr
by nickysielicki 8y ago
> The nightmare scenario for a financial institution is someone getting a mortgage, paying it off early, and not getting another mortgage.
This is only true provided that the mortgage rate for this person is below or at the federal funds rate, right? Given how low it is, even in the nightmare scenario they're making good money.
- mipmap04 8y agoDepends on the institution and their relationship to the borrower. For instance, if you are a servicer who bought the MSRs to a loan portfolio and a large cut of those borrowers pay off early, you may not make back your investment on the MSR purchase (this is unlikely though as rarely will that many people pay off early as to not payback the investment if you've conducted appropriate due diligence of the portfolio). Though for the originating institution you're generally correct.