Legend
1. A homebuyer obtains a mortgage from a lender (typically a bank). The lender transfers the money into the homebuyer’s account. The mortgage may be obtained through an intermediary – a broker.
2. The homebuyer repay the loan amount in accordance with an agreed schedule.
3. The lender considers holding the mortgage in its portfolio (i.e. simply collect the interest and principal payments over the next several years) or selling it. The lender elects to sell the mortgage (to raise finance to make other loans) to a government-sponsored enterprise such as Fannie Mae or Freddie Mac, or a private entity such as financial institutions or Wall Street investment firms (investment banks).