Mortgage Banks

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Mortgage Banks are special banking institutions established or licensed by the central government or at times by the state governments to provide loans to loan applicants or mortgagors against the conditional conveyance of property as security for the repayment of a loan.,

Facts about Mortgage Banks:

Mortgage banks are special institutions that fulfill their personal need for funds through the aid of the secondary markets as these banks are engaged solely in providing loans and do not have the facility to collect funds through different forms of deposits like fixed deposits or recurring deposits like commercial banks. Mortgage banks have lately expanded their scope of activity and they are now involved in efficiently delivering certain services related to the mortgage loans such as, identifying frauds, real time resolutions, and so on. Mortgage banks have the option to originate the as well as service those mortgage loans or simply originate the mortgage loan and make other agencies service the loans. The loan originating companies are entitled to receive an origination fees whereas those engaged in servicing loans gain a loan servicing fees.

Mortgage Banks in India:

The mortgage industry is a relatively novel component of the Indian financial sector and is popularly known as the housing finance industry. The latest reports have estimated the value of this industry as approximately US$ 18 billion. In India, the commercial banks and the other non-banking financial institutions act as mortgage banks, as they are engaged in providing mortgage loans and other mortgage related services on account of the absence of separate mortgage banks. However, the importance of the commercial banks in the mortgage industry has left the other financial institutions like the cooperative banks and a number of non-banking financial companies behind. This phenomenon can be proved from the ever-increasing share of the commercial banks in the direct housing finance industry from 27 % in the fiscal year to 57 % in the fiscal year 2003. A large number of Indian banks as well as foreign banks that have branches in India, are engaged in providing mortgage loans like the State Bank of India, the Citibank, the Housing Development Finance Corporation, the Industrial Credit and Investment Corporation of India, ABN Amro, and HSBC.

Advantage of Mortgage Banks:

The mortgage banks have grown in importance due to the simple loan repayment procedures. The most commonly available repayment option is the repayment of the principal amount together with the interest. The other variant to this plan is the repayment where neither the principal nor the interest amount is required to be paid. The third plan requires only the payment of interest, whereas the fourth plan requires the repayment of the total interest but partial payment of the principal amount. Mortgage banks have especially proved useful for the elderly with loans such as reverse mortgage loans. The most significant advantage of this loan is that the spouse of the mortgagor will continue to enjoy the mortgaged property till the time of death of the said person. After the death of the said person, the bank takes over the property to recover the loan.

Types of Mortgages provided by Mortgage Banks:

The mortgage banks are engaged in providing various kinds of mortgage loans like:

  • Participation Mortgage
  • Bridge Loan
  • Assumed Mortgage
  • Blanket loans
  • Non-Conforming Mortgage
  • Commercial Loan
  • Fixed rate mortgage loan
  • Adjustable rate mortgage loans
  • Seasoned Mortgage
  • Budget Loan
  • Blanket loans
  • Budget Loan Jumbo Mortgages
  • Budget Loan

Last Updated on 5/26/2011