How much do banks make when they sell loans on the secondary market?
Banks take their loans and bundle them together and sell them on the secondary market. What is the average fee they make on a typical transaction? What is key to understanding how this works?
as a mortgage broker, I would say that the fee can range a great deal. The fee could range from as small as a fraction of a percent to as high as possibly 8%. Also, things vary such as holding times, ie, who gets the interest and for how long, what happens if the paper defaults or pays off early, what happens if fraud is detected or suspected. Sorry, I can’t be more exact, but it really depends also on the coupon rate. The subprime paper is what is bringing more money, due to higher interest rate spreads. However, even these spreads are decreasing in the tough market.