Banks are able to sell any existing loans to another company, which can remove any financial obligations or responsibilities. It usually happens without the borrower’s knowledge, but it can work to their benefit. Not only does it keep the market more “liquid,” but it can also keep interest rates low. Financial institutions can buy and sell home loans in a “secondary market” that facilitates these types of trades.
Purpose of Home Loan Sales
ven though the “secondary market” operates without the borrower’s knowledge, it can work to their benefit. Not only can it be another revenue stream for financial institutions and qualified lenders, but it can also help to keep interest rates more competitive. This means that borrowers will be able to shop around to get the best deal possible.
This secondary market was created for the purpose of selling home loans and mortgages, and it led to the creation of Fannie Mae and Freddie Mac. These companies can buy loans if they meet certain criteria.
Not only can this system benefit the borrower, but it can also help the lender gain more capital to finance additional loans. This not only increases their ability to make money off of loan payments, but it can also give them an opportunity to sell them later on.
Purpose of the Secondary Market
A home loan has two parts. First there is the “promise to pay” portion, where the borrower agrees to pay a certain amount at a set interest rate over a specific period of time. Then there is the deed, which is a “title of ownership” that is attached to the property.
The lender has the legal right to take back the property if the payments are not made on the loan. This agreement applies to anyone who holds the note, which means that the new owner has the right to foreclose. Anyone who buys a home loan can expect to receive periodic payments over a long period of time, and he or she has the same rights as the original lender.
Structure of the Secondary Market
The secondary market is designed to facilitate the pricing, buying, and selling of home loans that are attached to residential properties. It is a network of financial institutions and Wall Street companies that are linked together through a form of real-time communication. Many people have compared its structure to that of the stock market, except that it’s not as complex or as involved.
The obvious goal of this market is to make money, but it also works to the borrower’s benefit. The added competition can keep interest rates low.
Using a Real Estate Attorney
While purchasing home loans can be lucrative, it’s not without its risks, which is why you need to protect yourself from any legal liabilities that may come with it. Real estate law is complex, which is why you need to hire a qualified real estate attorney to help you make sound financial decisions. He or she will be able to inform you of any legal risks that may be associated with the purchase of a home loan.
However, searching for the right attorney can seem like a daunting task, especially with the over-abundance of law firms and private lawyers in a single area. That’s why you need to do your due diligence on everyone you contact.
Make sure you ask detailed questions about their experience, and be sure to check your state’s Bar Association to see if they have been subject to any hearings or investigations. Not only do you want to find someone with the right amount of experience, but you also want to hire someone legitimate.
Of course, you shouldn’t overlook the possibility that someone you know may be able to recommend someone they know is reputable. It could save you the trouble of looking through a long list of phone numbers. Besides, it might be able to build a professional rapport if he or she has worked with someone you know.
Our firm has a team of experts who are familiar with everything related to real estate law. Not only can we make sure you are protected from any potential legal issues, but we can also work on your behalf if something goes wrong. If you want to find out how we can help you, get in touch with us today!