See: Mortgage.
As of 2018, Americans collectively owed over $10 trillion—that’s “trillion” with a “t”—in mortgage debt. Nearly $2 billion worth of mortgages were originated that year, and if we consider that the average purchase price of a home was somewhere in the neighborhood of $300,000, that’s a whole lot of mortgages. Our point is that mortgage originators are busy people. So when it comes time to manage those mortgages—billing borrowers, collecting and processing payments, dealing with property taxes, etc.—a lot of mortgage originators say, “Ain’t nobody got time for that.”
Enter MSRs, which stands for “mortgage servicing rights.” MSRs happen when the original lending company contracts with a third party to handle all of the mortgage administration stuff we mentioned above. In essence, the MSR is buying the mortgage from the original lender, which means the lender can go off and lend more money to other wannabe homeowners. MSRs handle billing, deal with mortgage insurance premiums, and tackle tax issues and interest rate concerns and everything else that goes along with managing a mortgage. And all they ask for in return is (surprise!) a fee.
Related or Semi-related Video
Finance: What is a second mortgage?4 Views
Finance allah shmoop What is a second mortgage Okay you
know what a first mortgages it's otherwise cleverly named what
is called it is called oh yeah Mortgage it's Just
a loan on a house You paid four hundred grand
for this baby Hundred grand down two hundred fifty grand
in a first mortgage And they're still fifty grand You
owe well where's that fifty large coming from the bank
wouldn't loan you any more on a first mortgage that
was costing you six percent a year Tio you know
to rent that money So you had to get a
second mortgage which should things go awry and you become
a statistic Well that's it's fully behind the first mortgage
in the priority stack of payback So in a bankruptcy
situation the first mortgage first what's called a first mortgage
get it fully paid along with any fees associated with
it and back interest accrued and any other things that
are associated with that first mortgage it stands in line
first in priority Then any cash leftover gets attributed to
that second mortgage So not surprisingly second mortgage money costs
a lot more to rent then first mortgage money because
the risk of non payment in a bad situation is
meaningful E higher especially when the borrowed does this for 00:01:25.136 --> [endTime] a living
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