Becoming the bank for mortgages
Seems like you might be able to earn 4% and above in current mortgage conditions by lending money for mortgage. Has anyone done this? How safe would it be? How do you do it? I heard lending club is one way.
There is a reason why mortgages are bundled. To reduce risk.
It's way too much risk, buy a mortgage fund or GNMA treasury if you want to invest in mortgages.
What’s the yield on those?
Is this a home or commercial property you own? Seller financing is far more common than most people realize. It’s not risk free. Foreclosure can often take months if they fight. 4% is very low. Seller financing typically carries higher interest rate than bank mortgages or a juiced up price. If you’re going to do it I would suggest a rate of no less than 10%. Consider why they would want seller financing. Is it because they wouldn’t be approved by a bank? If a bank wouldn’t approve then why should you? It can be a great way to sell your property faster and at a better price. It’s not crazy risky as long as you have the right documents in place but there is some risk to be aware of.
I did not mean seller financing. This was more of peer to peer lending only backed by mortgage based security. So in case the borrower defaults, you will own the security just like the bank does. It may be uncommon but seems like a fair thing to do and more people doing it means the interest rates on mortgages would really have to come down. Better for economy and benefits all. Totally does not make sense where we pay 6% for mortgage but get 0.5% interest for our money when we deposit in bank.
I agree, why are banks able to have such a large spread from the fed funds rate and mortgage interest rates?
There’s zero risk on your deposits since it’s FDIC insured. FDIC often pays out overnight. Even though mortgages are asset backed they carry risk. They take months to years to foreclosure and homes can lose value. Then even more time to resell. Plus many homeowners who have their home foreclosed on often time absolutely destroy the homes as a fuck you to the bank. Mortgages also cost a lot for a bank to service. There are plenty of banks with spreads of 4% or less.
How do you make them pay when someone refuses to pay back?
You foreclose on the property?????