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I naively thought that if mortgage rates are 8% then I ought to be able to invest in a mortgage backed security for an 8% annual return. It turns out that, in t
by changoplatanero 3y ago
I naively thought that if mortgage rates are 8% then I ought to be able to invest in a mortgage backed security for an 8% annual return. It turns out that, in the process of creating the mortgage backed securities, various entities take fees and the portion of the mortgage that goes to the investor can be several percent less than the interest rate that the homeowner pays.
- b112 3y agoSome people have variable rate mortgages, are you sure you want to invest in such securities?!
- freeAgent 3y agoRates just reached 8%. Where do you think all the securitized 8% mortgages come from? People actually have to lock that rate and close. Then securitization can happen, and of course during that process there will be fees taken out. If you want 8%, become a direct lender.
- throwaway2037 3y agoWhy buy an MBS when you can buy a mortgage pool from Fannie or Freddie directly? The fees are lower, but you own the full mortgage -- and the full risk of default from borrowers. MBS is better for Alt-A and below credit scores, where you want to protect yourself against losses.
- SilasX 3y agoLink to where you would do this?
- throwaway2037 3y agoMortgage pools are only for institutions and/or very wealthy (private banked) individuals. If you are already private banked, ask your rep.
- SilasX 3y agoWell, then I guess you have your answer to this: > Why buy an MBS when you can buy a mortgage pool from Fannie or Freddie directly?
- qeternity 3y agoWhat? This must be a troll, right? You figured because a homeowner is paying 8% that 100% of that revenue would come to you? No servicing fees. No accounting. No overhead. Zero defaults. Stop making it out to be nefarious. It's not in the process of "making a mortgage backed security". It's in the process of servicing a mortgage.