I’d like to understand a few basic things about how mortgages work here in the US.
A week or two ago, I was listening to NPR, and they had a guest that talked a little about the mortgage crisis, and also explained a little about how getting a mortgage worked then, and now. My memory is crap, so I’ll post what I remember, and then ask a question about it.
She said something to the effect of in the past, the place you applied for a loan, was the place that lent you the money. Now, she said, there are three agencies* involved. One of them being the place where you apply for a loan, which isn’t agency that actually loans you the money; the agency that actually loans you the money, and I can’t remember what the third one is.
My first question is, when you go to apply for a mortgage, what agencies are involved? (My wife and I got our mortgage 10 to 11 years ago, so I think things were simpler then).
My second question has to do with the “slicing and dicing” of mortgages. In the bundle of mortgages, is it made of full mortgages, or would a bundle be made up of say, something like, 30% of this mortgage, 45% of that mortgage, 22% of another mortgage, and so on…?
As far as I know, unless somebody has 2 or more mortgages out, you usually send the mortgage to one company. For example, my wife and I pay Wells Fargo. Does Wells Fargo own 100% of the mortgage?
And finally, for those people with houses worth less than what they owe, if they are able to refinance for the current value…I’ll have to give an example…Say somebody has $175,000 left to pay off on a house, but the house is now worth $150,000. They basically want to pay back $25,000 less than what they borrowed, correct? And if so, does a single bank lose the $25,000 (assuming the refinance goes through), or, because of “slicing and dicing” does it mean that one bank looses a few thousand here, and another one a few thousand there?
Thank you
*I’m using the word agency as a catch-all for agency, business, body, organization, you get the idea…