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41 votes
Accepted

Why are banks providing mortgages?

A bank (or anyone else) considering possible investments needs to consider both return and risk. Stock market investment is risky in two respects: a) individual stocks may achieve more or less return ...
Adam Bailey's user avatar
  • 8,529
25 votes
Accepted

Why did banks give out subprime mortgages leading up to the 2007 financial crisis to begin with?

If you want all details read this excellent Brookings report on the Origins of the Financial Crisis by Baily et al. Its an excellent source on this topic and it is not too technical for laymen to ...
1muflon1's user avatar
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15 votes

Why did banks give out subprime mortgages leading up to the 2007 financial crisis to begin with?

@1muflon1's answer is correct, but only tells half of the story. The other half of the story, that Brookings studiously avoids mentioning, because it conflicts with their values, is that lenders were ...
Eugene's user avatar
  • 471
11 votes

Why are banks providing mortgages?

Banks are in the business of lending money. If they didn't do this, then they wouldn't be called a bank. They would be called a fund manager or stock broker or some sort. Mortgages are safer ...
uberhaxed's user avatar
  • 229
7 votes

Why are banks providing mortgages?

Because it is still profitable for bank to do so. Your question is analogous to the question, "why do some car companies create cheap cars with low markup when there are luxury cars that often ...
1muflon1's user avatar
  • 56.9k
5 votes

Why are banks providing mortgages?

Traditionally, Banks are in the business of converting interest rate periods. Suppose you want to lend 1000\$, but get at it whenever you want. If there are 1000 of you, that is 1 million dollars. ...
Yakk's user avatar
  • 159
3 votes

Why are banks providing mortgages?

Some reasons have already been mentioned, another would be that banks lend not only their own money, but also the money of private individuals and let them share in the interest income. If a bank ...
Andreas's user avatar
  • 31
3 votes

Why are banks providing mortgages?

In the United States at least, mortgages are subsidized by the federal government via Fannie Mae and Freddie Mac. These quasi-public entities are required by law to purchase mortgages from loan ...
Willa's user avatar
  • 131
3 votes

Why are banks providing mortgages?

Because they are allowed to lend you money they don’t actually have. When a bank releases money for your mortgage, it actually comes from nowhere. They magically¹ make it appear on your account, or ...
Didier L's user avatar
  • 179
2 votes
Accepted

What are the owners of CDO squared paid with

A CDO (collateralized debt obligation) is a combination of obligations that depend on the performance of the of underlying assets (collateral), which are typically (commercial) loans, bonds, or asset-...
AKdemy's user avatar
  • 4,122
2 votes

Why are banks providing mortgages?

Let me try to give a Dutch-focused answer. Dutch banks are sitting on the largest amount of savings accounts ever; in 2021 it exceeded half a trillion euro's. Banks aren't paying any significant ...
MSalters's user avatar
  • 156
1 vote

Why did banks give out subprime mortgages leading up to the 2007 financial crisis to begin with?

Quick answer: the banks who created the mortgages got paid for creating them (origination fees) then offloaded the risky loans to someone else within 30-60 days. Why there was a downstream market for ...
JWally's user avatar
  • 119
1 vote
Accepted

Are promissory notes or mortgages considered cash transactions?

Libor is defined as the rate at which an individual Contributor Panel bank could borrow funds. Funds in this context refer to unsecured inter-bank cash or cash raised through primary issuance of inter-...
AKdemy's user avatar
  • 4,122
1 vote

Are fixed rate mortgages better in periods of low interest?

The fixed and variable interest rate loans compete against each other. As a consequence the expected cost of them should be more or less equal otherwise why would ever someone take variable interest ...
1muflon1's user avatar
  • 56.9k
1 vote

Are fixed rate mortgages better in periods of low interest?

This is a long comment rather than a full answer. I think the OP should clarify the meaning of "lock" by creating an example. Usually, by "locking" a rate, you are slightly ...
High GPA's user avatar
  • 1,916
1 vote

Are fixed rate mortgages better in periods of low interest?

What do you mean by "better"? Do you mean risk, by any chance? Thinking in terms of risk this could mean changes or fluctuations in present value of debt for instance. Then a floating rate ...
T123's user avatar
  • 303

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