If lenders do not want borrowers to default, why don’t they lower rates?
Why aren’t banks easy to talk to about modifying a mortgage?
Because, most of the time, the bank no longer owns your loan. They’ve sold it. It’s been packaged into tranches.
Report: Just after the Great Depression, home mortgages were made mostly by local banks and savings and loan associations (S&Ls). A home mortgage applicant visited a local financial institution and applied with a loan officer in person. Loan decisions were made by a loan committee comprised of loan officers who lived in the same community. After the loan was made, the borrower would make monthly payments at that same office. If they had questions regarding the loan, borrowers would call the bank or S&L and speak to an employee who likely had worked there for the past decade. (Remember George Bailey in It’s a Wonderful Life?)
The mortgage business has changed considerably since the early post-Depression years. To be assured of a stable supply of money to fund mortgages, the Federal National Mortgage Association (Fannie Mae), the Government National Mortgage Association (Ginnie Mae), and the Federal Home Loan Mortgage Corporation (Freddie Mac) — all government sponsored enterprises (GSEs) — were established to provide a national secondary market for conventional and government guaranteed mortgages. Thereafter, local financial institutions would originate a mortgage then sell it to a GSE. The handling of that mortgage (servicing rights) also was sold to a bank, S&L or mortgage company that was often some physical distance from the mortgaged property.