<p>After the bank sells its loan to Fannie Mae or Freddie Mac, it becomes a mortgage servicer.  The servicer processes payments on the loan, and also acts on behalf of Fannie or Freddie in any foreclosure proceedings resulting from a default by the borrower.  If there is a foreclosure, the loan is purchased at par by Fannie/Freddie  from the end investor (thus protecting them fully).  The bank would send the foreclosure proceeds to Fannie/Freddie.</p>
<p>To answer the second question, the bank makes money by keeping a portion of every mortgage payment for itself, in return for servicing the loan.</p>

CC BY-SA 4.0
2021-12-05T16:32:40.863Z
Thank you for answering. Just so I understand :                     Customer -> Bank -> Freddie Mac -> Investor/Government.                                                       Is this the correct procedure of how it works?
Inderjeet
CC BY-SA 4.0
2021-12-06T04:41:03.913Z
Yes except remove government.   Freddie Mac is a government agency- that’s how government is involved.
dm63
CC BY-SA 4.0
2021-12-04T12:33:43.830Z
2021-12-04T12:33:43.830Z
dm63
<p>I was reading about MBS's and according to my understanding, suppose the bank gives me person a loan for house. Then, the bank sells the loan to the investor/government through an agency like Freddie mac in the form of MBS. So, me paying the mortgage money will go to that investor/government, right?</p>
<p>Now, if I default on the mortgage why will the bank take the possession of it? And how do banks and the investor/government profit from my mortgages?</p>

CC BY-SA 4.0
2021-12-02T17:35:18.527Z
Please clarify your specific problem or provide additional details to highlight exactly what you need. As it's currently written, it's hard to tell exactly what you're asking.
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<macroeconomics><stock-market>
Mortgage-Backed Securities
Inderjeet
# Mortgage-Backed Securities

(Asked by: username_0 on 2021-12-02)

I was reading about MBS's and according to my understanding, suppose the bank gives me person a loan for house. Then, the bank sells the loan to the investor/government through an agency like Freddie mac in the form of MBS. So, me paying the mortgage money will go to that investor/government, right?

Now, if I default on the mortgage why will the bank take the possession of it? And how do banks and the investor/government profit from my mortgages?

**Tags:** macroeconomics, stock-market

> **Comments:**
> **username_1**: Please clarify your specific problem or provide additional details to highlight exactly what you need. As it's currently written, it's hard to tell exactly what you're asking.  

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## 1 answers

### Answer by username_2 on 2021-12-04. Score: 1

After the bank sells its loan to Fannie Mae or Freddie Mac, it becomes a mortgage servicer. The servicer processes payments on the loan, and also acts on behalf of Fannie or Freddie in any foreclosure proceedings resulting from a default by the borrower. If there is a foreclosure, the loan is purchased at par by Fannie/Freddie from the end investor (thus protecting them fully). The bank would send the foreclosure proceeds to Fannie/Freddie.

To answer the second question, the bank makes money by keeping a portion of every mortgage payment for itself, in return for servicing the loan.

> **Comments:**
> **username_0**: Thank you for answering. Just so I understand :                     Customer -> Bank -> Freddie Mac -> Investor/Government.                                                       Is this the correct procedure of how it works?  
> **username_2**: Yes except remove government.   Freddie Mac is a government agency- that’s how government is involved.  

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