Your Borrower’s Loan Funds – Then What?

Orion’s brokers are experts when it comes to helping their clients to the point of funding and closing the loan. Brokers work with real estate agents, escrow & title officers, inspectors, and everyone else involved in helping finance a home. Yes, the Federal Reserve increased short term rates last week, but regardless of interest rates, it is important for brokers, and borrowers, to know what happens after a loan closes. And where do your client’s monthly payments go?

If you think about it, and to explain to your client, after their loan closes with Orion, it is like a bond, like those issued by the U.S. Government through the Treasury. The U.S. issues T-bills, notes, or bonds, that pay interest. They are viewed as the safest securities in the world. Anyone in the world can buy securities issued by the U.S. Government, and when interest payments are made, they are electronically transferred into the bank accounts of the holder.

When your client takes out a mortgage, someone (usually some financial institution) “holds” that mortgage. That is, they’re the lender and they must be paid back. Nowadays it’s not always obvious who holds a mortgage, as it may have been sold to someone else, much like a Treasury bond can be sold. The composition of mortgage holders has changed over time. Initially, it was mostly banks—but also some individuals and, to a small degree, also the government. 

Gradually, mortgage pools and trusts have taken over—that is, companies that specialize in the pooling of similar mortgages that can then be sold as securities. Thus, the so-called securitization of mortgages. But many were not stable, and the government took over a large portion of their portfolios in 2010 to stabilize the mortgage and real estate markets. Fortunately, things have steadied.

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