From: shannon@sierra.com (Shannon Maher)
Subject: Re: Mortgage Banks...
Organization: Sierra Geophysics Inc.,  Kirkland, Wa
Date: Thu, 13 Aug 1992 16:35:12 GMT

In article <1992Aug7.161918.6522@cs.cornell.edu> wayner@cs.cornell.edu (Peter Wayner) writes:
>Are mortgages a commodity item? Does it make a difference which bank I
>choose? I've heard that many banks just resell the mortgage and
>securitize it and so it doesn't really matter whether we have a
>friendly, on-going relationship with the bank.
>
>Can anyone tell me their experiences? 
>
>-Peter

   There are several issues concerning the disposition of mortgages that 
should affect your choice of who originates your loans.  There are two 
main paths for your mortgage to proceed after closing; in path 1, it 
is bundled with a large number of other mortgages and sold on the 
secondary market to investors; in path 2 (the path less travelled), 
the originating institution keeps the loan for it's own portfolio- 
maybe to be resold at a later date.  This is all transparent to you.  
What you care about is the servicing of the loan.  Loan servicing 
(who you send your money to, who keeps your records, and who sends 
you statements) is a profit center;  it is handled as an item totally 
separate from your actual debt.  Many banks keep the servicing 
themselves; some sell the servicing along with the loan.

   Why do you care?  Several times in the last few years, I have had a 
change in servicing of my mortgage - typically because of take-over of a 
bank by another bank or by the feds.  While I must assume that the 
institutions who took over servicing would EVENTUALLY prove to be 
competent (probably a BAD assumption, but...), the period just after 
the servicing is transferred has always been, oh, lets say erratic 
(incompetent also works here).  Point number one, then, is to ask 
banks how often the keep the loan servicing themselves.  This is FAR 
preferable (to me, anyway) to a bank that will sell your loan servicing.  
Most banks will tell you at the time you ask for current interest rates 
(there may be a law requiring them to tell you...).  I have recently 
shopped for a new loan, and found several banks who never sell loan 
servicing.  As a final word on this subject - mortgage brokers (as
opposed to banks) ALWAYS sell the loan, and nominally ALWAYS sell the 
servicing.  In fact, I had a mortgage broker once try to charge me for
selling the loan, thus guaranteeing the broker a double profit - from me,
and from the buyer. I fought it, and won.

  Another reason for shopping around - there can be a remarkable difference
in rates.  Just because all loans are sold on the same secondary market,
thereby guaranteeing the same cost of money to each bank, doesn't mean all
banks will charge you the same.  Different banks and mortgage brokers have
different levels of overhead and profit margins.  Again, after shopping a
15 year fixed rate loan last week, I found rates running from 7.125% with
1.5 loan fee, to 7.45% with 2 pts. of fee, for exactly the same loan.  
This is in spite of the fact that I used a recent newpaper article that 
listed rates and institutions to guide my shopping away from the higher 
priced lenders.  Note that the fees charged by the lenders can vary 
widely, also.  Always get a "good-faith" estimate of the closing costs
from a number of lenders before you commit.  Many will FAX you the 
estimates on request.

  The third reason for shopping around is that the larger banks keep the
processing of your loan request, prior to closing, in house, while the 
smaller banks and the many of the mortgage brokers will hire outside 
people for things like credit checks and house appraisals.  Keeping the 
process in house allows the banks to keep control of the process.  
If you need a loan relatively fast, or would like some guarantee (?) of 
consistency, find out if the bank will process you loan itself.  In 
my case, even though the mortgage business is very active right now 
in Seattle, I can get 30 day turn around from several banks, but 
cannot get anywhere near that turnaround from a mortgage broker.

						Shannon Maher
						Sierra Geophysics Inc.
						shannon@sierra.com