Do loan officers work for the government?

[Jack Cheadle]

Let me try to get my understanding correct and please help me where I am wrong. 

1. Loan officers for conventional mortgages, no matter which bank, don't really sell you the money from their bank. They sell you a Fannie or Freddie mortgage and the loan officer/bank makes a little on the spread and that is how they profit. Which means, most every conventional lender is just a middle man between us. 

2. Fannie and Freddie are government funded programs full of tax money and pretty much everybody in America's mortgages. And this money is either our tax dollars being sold back to us or is not really money at all and just numbers in a computer. 

3. Those mortgages are packaged up and gambled against on Wall Street, where our mutual funds from our retirement accounts are making their money. 

Conclusion: Loan officers are puppets for the government and we are letting the government control the interest rates in the country by using conventional mortgages.

Does that sum it up?

[Wayne Brooks]

Huh?

Conventional lenders Do lend you their own money, then they sell your mtg to Fannie/Freddie.

Fannie and Freddie are Not funded by the government.

Fannie and Freddie loans don't get bundled up and sold as securities.....other private money loans got securitized this way.

Conclusion: Maybe you've read too many conspiracy theories?

[Jeff B.]

Freddie & Fanny are private companies Backed (guaranteed ) by the Fed.  There is talk afloat just now to Drop that backing altogether.

Any comments re Freddy/Fanny requires ... only means those companies only purchase notes with specific profiles.  This makes trading/selling these obligations a known entity to all who participate in portfolio trading in the back room.

[Chris Mason]

Hi @Jack Cheadle,

I'm not going to restate what others said, but I'll add...

You're assuming that Freddie/Fannie are always the ones willing to pay the highest price on the secondary market. This is not the case. Often times, especially for mortgages that exceed the GSE standards, some other actor on the secondary market is willing to pay top dollar. This is part of what we do when we shop lenders/employers.

This is one of the reasons we don't like giving out rate quotes without a full credit package. I need to know if you're going to be in the "bare minimum GSE standards" bucket of mortgages or the "very well qualified" bucket, or I risk either over-promising and under-delivering OR losing business because I'm being cynical and assuming "bare minimum" bucket when you should be in the "very well qualified" bucket.

This is also related to lender overlays.  

[Jack Cheadle]

OK, thank you, that helps. 

Sorry if I sounded overly like a conspiracy theorist. I have just been doing some research on what Fannie and Freddie are and how that is different from my community bank just loaning me money, like a savings and loan would.