30 years ago, when I bought my current home here in central Illinois and a local bank financed it. The very day we moved in there was a letter in our mail box from that local bank telling us that they had sold our mortgage to a company in Iowa.
Exactly same terms, interest rate, payments etc. 15 year mortgage, paid off in 7 years.
Can anyone explain to me how either the original lender or the new one profited by the sale of my mortgage?
yes, mortgages are a commodity and like a bond, the value fluctuates with the rise and fall of interest rates. If rates go up, the mortgage decreases and if rates go down the value of the mortgage increases. Mortgage bankers and banks sell loans in order to make new loans otherwise they would run out of money to lend.
Mortgage Bankers of old were in it to service the loan. Collect the payment, keep a small fee and “pass thru” the P and I to the investor.
Car loans are no different. Dealers prefer financing because they can make money on the loan due to higher rates on consumer loans.
I was a capital markets manager for mortgage companies and banks for almost 30 years. Hedging the interest rate risk then selling the loan is what i did. And it’s why I have gray hair.