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Tracing Where Loan Payments Go : Lending: After you mail your check, the money may wind up with the original lender, or it might go to investors.


If you're like many homeowners, you dread the day your monthly mortgage statement comes in the mail. But you write out a check, send it to the lender and forget about it until the next month.

What you probably don't realize, however, is that your dropping your check in the mailbox is merely the start of a long journey for your money.

Although some of your money will likely be loaned out again to other home buyers in your neighborhood, there's a good chance that part of your payment may go to a farmer in Iowa, a life insurance company in New York, or even an investor in Tokyo or London.

"On the surface, the mortgage lending business seems pretty simple. But it's a lot more complex than the typical American might imagine," said David Andrukonis, an official with the Federal Home Loan Mortgage Corp. in Washington.

Exactly what happens to your mortgage payment largely depends on whether the lender keeps your loan on its books or sells it to another institution.

Institutions that keep most of the loans they make are often called "portfolio lenders" because they keep your mortgage in their portfolio of loans.

A portfolio lender is basically betting that over the long term, it will collect more money through interest payments than it will pay out to depositors who have interest-bearing accounts.

Some of the biggest institutions that consider themselves portfolio lenders are Great Western Bank, Home Savings of America and Wells Fargo Bank.

A non-portfolio lender doesn't hold your mortgage until it's fully paid. Instead, it sells your loan to another institution such as the Federal Home Loan Mortgage Corp. (commonly called Freddie Mac) or the Federal National Mortgage Assn. (Fannie Mae).

These two agencies typically pool your mortgage with thousands of other loans that they have purchased and then sell shares in the pools to individual investors or big financial institutions.

Non-portfolio lenders take the proceeds from the sale of your mortgage and then use the money to make new loans to other borrowers.

"Some lenders call themselves portfolio lenders and others call themselves non-portfolio lenders, but most institutions today are really a hybrid," said Tom Criser, president of a mortgage brokerage firm known as the Lenders Center.

"They keep some of the loans they make in their portfolio and sell the others off."

Lenders who plan to sell their loans to Fannie Mae or Freddie Mac tend to follow relatively strict underwriting guidelines. That's because Fannie and Freddie generally won't buy a loan that they consider too risky for its investors.

Lenders who keep their loans in their portfolios, on the other hand, tend to be a bit more flexible when it comes to determining whether or not you qualify for a loan because they don't have to worry about meeting Fannie and Freddie's guidelines.

If you're dealing with a lender that has kept your loan, your monthly check is probably sent to the institution's payment processing center.

Your account number and the size of your payment is entered into a computer, which then calculates how much goes toward interest and how much goes to principal.

The lender then deposits your check into its account. A sizable portion of the money is used to pay interest to the institution's depositors, who have invested in its certificates of deposit or other instruments.

Although it's not much fun to pay hundreds or even thousands of dollars a month to keep a roof over your head, it might make you feel a little better to know that a portion of your payment is reinvested in your own neighborhood, even if your loan was sold to Fannie Mae or Freddie Mac.

Under the Community Reinvestment Act of 1977, all federally insured banks and savings and loans must invest some of their money in the communities that they serve.

Congress passed the measure in an attempt to prevent "redlining"--the refusal by lending institutions to make loans in certain areas.

"We've committed to lend $4 billion under the CRA," said Scott McAfee, an executive vice president with Security Pacific National Bank.

The money that Security Pacific and other lenders provide under the act is used for a variety of programs, McAfee said.

"Some of the money goes into loan programs for borrowers who don't have a big down payment, and some of the money goes to programs for borrowers who don't have a long credit history," he said.

Other programs provide home-improvement loans, loans to people who want to start their own business and the like.

If your loan was sold to Fannie Mae or Freddie Mac, the money might also be reinvested in your community through one of the many special loan programs that the two agencies have developed.

But as you'll see next week, there's also a good chance that some of your monthly payment winds up in the coffers of a huge insurance company or pension fund, or even in the pockets of a foreign investor.

Letters and questions may be sent to Myers at the Real Estate section, Los Angeles Times, Times Mirror Square, Los Angeles 90053. Questions cannot be answered individually. AVERAGE RATES FOR RESIDENTIAL MORTGAGES Average rates for residential mortgages as of Oct. 19, 1990.

Survey Conventional Mortgages Adjustable Mortgages Area 15 Year 30 Year Composite 1 Year Composite National 9.96% 10.29% 10.14% 8.15% 8.44% California 10.21 10.51 10.37 8.46 8.33 Connecticut 10.04 10.36 10.23 8.23 8.46 Wash. D.C. 9.88 10.21 10.06 7.85 8.21 Florida 9.98 10.30 10.15 8.14 8.32 Mass. 10.05 10.42 10.26 8.36 8.77 New Jersey 9.94 10.25 10.11 8.04 8.49 N.Y. Metro 10.03 10.36 10.21 8.20 8.54 New York 10.12 10.46 10.31 8.31 8.60 N.Y. Co-ops 10.35 10.66 10.54 8.54 8.86 Pa. 9.69 10.03 9.87 7.98 8.07 Texas 9.71 10.09 9.92 8.13 8.22

SOURCE: HSH Associates, Butler, N.J.

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