Sources of Mortgage Loan Money , Part I

Where does your mortgage money come from and why don't lenders run out of money? Over the next several days, we'll examine this topic.


Most of the money that is made available for home loans comes from three major lending institutions:

• Fannie Mae: Federal National Mortgage Association (FNMA)
• Freddie Mac: Federal Home Loan Mortgage Corporation (FHLMC), and
• Ginnie Mae Government National Mortgage Association (GNMA)
  

As a borrower, you apply for a home loan through a mortgage broker or banker. Once your mortgage professional completes all required processing and verifications, he decides whether you qualify for a loan. After you obtain financing for the purchase of a home, you begin making monthly mortgage payments.

Your mortgage loan may be packaged into a "pool" with several other loans and sold off to Fannie Mae, Freddie Mac, or Ginnie Mae. (Some mortgage companies don't sell directly to those major investors, but sell their loans to the wholesalers, who then in turn sell it to one of the big three institutions). Once this happens, it frees up more money in a portfolio. This gives the mortgage lender the necessary resources to make additional loans to other homebuyers.

Once your loan is sold off, your mortgage professional isn’t the loan owner anymore. Instead, he is the loan servicer. (This means that he receives a monthly fee from Fannie Mae, Freddie Mac, or Ginnie Mae for processing your mortgage payments.) Don’t be surprised if over time your home loan gets transferred from one mortgage servicer to another. They aren't selling your loan again, only the right to service it.