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Mortgage Banks, definition and functions!
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[QUOTE="Mellorando, post: 205860, member: 37973"] A mortgage bank is a bank specializing in mortgage loans. It can be involved in originating or servicing mortgage loans, or both. The banks loan their own capital to borrowers and either collect payments in installments along with a certain rate of interest or sell their loans in the secondary market. A mortgage is the exact same thing, except applied to a property (a home or building). In simple terms, a mortgage is a type of loan, just like an auto-loan or financing for jewelry. Specifically it is a loan in which a person borrows money to buy or refinance a house. That’s it. A loan can be used to describe many different types of financial transactions. You can have a student loan, or per the example above, a loan to buy a car. If you are borrowing money to buy a home, you will need a home loan. And home loans are called mortgages. A mortgage bank specializes in lending the money against the mortgage for specific securities. They structure various loan products at a cheap rate or with better funding arrangements and involve various activities like loan origination, mortgage sale, and loan/mortgage servicing. The fees on such transactions remain very small; hence the profitability in such businesses remains high. * Functions of a mortgage bank Below are the specific functions being undertaken by a mortgage bank – 1 – Solicit Business The major work of such a bank is to identify the individuals or corporations who need funds and own some assets that they can offer as security. 2 – Perform Financial Analysis Their major role is to verify the financial stability of their customers and verify the market scenario to predict the trends. 3 – Perform Financial Counselling High net worth individuals and corporations who have excess funds or require frequent fundings consult mortgage banks about how they can invest or get their money at an optimum cost. 4 – Loan Origination One of the major tasks of such banks is to provide loans, termed as ‘Loan Origination’ in this field. First, they verify the documents and assess the repayment capacity and the valuation of their assets. Then, based on that, they determine the loan’s value that can be landed on them. 5 – Servicing of Mortgage Such banks also purchase the right to service the mortgage loan and earn the servicing fees [/QUOTE]
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