3 ms·

Here in the UK, as far as I can tell, your lender can't sell on your mortgage. It's a contract between you and them. I wonder how many countries do allow that.

Denvercoder9 5y ago
They might not be allowed to sell the servicing rights, but they almost certainly can sell the risk and returns.
emilecantin 5y ago
Yeah, as a Canadian all of this seems pretty alien to me. To get my mortgage, I went to a specific bank, signed a contract with their logo at the top, the amount I owe / pay shows up in my online at that bank, and I send money every month to that same bank. If a different entity came up and told me to pay them instead, I's assume it's a scam. I'm surprised scammers in the US haven't tried that yet.
- marvin 5y ago
  Also, as a Norwegian, risks related to refinancing in the case of a falling interest rate don't exist. Mortgages are floating-rate by default. If you enter a fixed interest rate contract, you are on the hook for the entire interest difference of the duration of the fixed rate contract if you terminate the contract. 10 year fixed rate contract, loan of 1 million and the rate falls from 3% to 2% on the second day of the contract -- if you terminate the contract now, you owe the bank 1% of the sum of whatever your loan balance would have been during each of the next 10 years. To be fair, you get the opposite deal if the interest rate rises.
- jjav 5y ago
  In the US you can go directly to a bank to get a mortgage, but I'm not sure why one would want to since you can't comparison shop that way. Better to go to a broker who shops your loan among dozens of lenders to find the best terms. You typically end up with some entity you've never heard of (not a known bank), who will hold the loan for a month or two and then sell it off to someone else.
namdnay 5y ago
Even if you can’t sell the mortgage itself, I’m sure you can sell on the “economics” of the mortgage - just like you can invest in gold without actually having a vault at home
betterunix2 5y ago
They can use the mortgage as collateral for their own loans, and I am not really sure how that is any different...
NoboruWataya 5y ago
It is generally possible under English law to assign rights under a contract, just not liabilities. It's also possible for the mortgage contract itself to contain a provision permitting transfer by the bank. Mortgage-backed securities (which generally involve the selling of mortgages to an SPV) are certainly a thing in the UK. For retail mortgages there are presumably regulatory considerations as well, eg, the mortgage probably has to continue to be serviced by a regulated entity. It's not uncommon for the original lender to sell the rights to the mortgage but continue to service it.

Denvercoder9 5y ago

They might not be allowed to sell the servicing rights, but they almost certainly can sell the risk and returns.

emilecantin 5y ago

Yeah, as a Canadian all of this seems pretty alien to me. To get my mortgage, I went to a specific bank, signed a contract with their logo at the top, the amount I owe / pay shows up in my online at that bank, and I send money every month to that same bank. If a different entity came up and told me to pay them instead, I's assume it's a scam. I'm surprised scammers in the US haven't tried that yet.

marvin 5y ago
Also, as a Norwegian, risks related to refinancing in the case of a falling interest rate don't exist. Mortgages are floating-rate by default. If you enter a fixed interest rate contract, you are on the hook for the entire interest difference of the duration of the fixed rate contract if you terminate the contract. 10 year fixed rate contract, loan of 1 million and the rate falls from 3% to 2% on the second day of the contract -- if you terminate the contract now, you owe the bank 1% of the sum of whatever your loan balance would have been during each of the next 10 years. To be fair, you get the opposite deal if the interest rate rises.
jjav 5y ago
In the US you can go directly to a bank to get a mortgage, but I'm not sure why one would want to since you can't comparison shop that way. Better to go to a broker who shops your loan among dozens of lenders to find the best terms. You typically end up with some entity you've never heard of (not a known bank), who will hold the loan for a month or two and then sell it off to someone else.

namdnay 5y ago

Even if you can’t sell the mortgage itself, I’m sure you can sell on the “economics” of the mortgage - just like you can invest in gold without actually having a vault at home

betterunix2 5y ago

They can use the mortgage as collateral for their own loans, and I am not really sure how that is any different...

NoboruWataya 5y ago

It is generally possible under English law to assign rights under a contract, just not liabilities. It's also possible for the mortgage contract itself to contain a provision permitting transfer by the bank. Mortgage-backed securities (which generally involve the selling of mortgages to an SPV) are certainly a thing in the UK. For retail mortgages there are presumably regulatory considerations as well, eg, the mortgage probably has to continue to be serviced by a regulated entity. It's not uncommon for the original lender to sell the rights to the mortgage but continue to service it.