A mortgage bank is a type of financial entity that performs assignments of loans and loans with mortgage guarantee.
These banks emerged several centuries ago to provide financing and liquidity to individuals and institutions in exchange for the backing of a real guarantee, usually a real estate asset.
Just as there are commercial, investment and private banks, mortgage banks are oriented to production and not to consumption like the previous ones, and have among their main objectives the business of obtaining savings and providing loans that have as guarantee a mortgage , that is, to provide support with a real estate asset (land, house, industry …).
The way in which these financial institutions operate is through the issuance of mortgagebonds, savings bonds and acceptances of savings deposits, with which they obtain liquidity and capital from the market, guaranteeing them the asset mortgaged by the borrower or the nominal value of this one. In this way, it can be said that the mortgage bank is a pure financial intermediary between surplus savings and those in need of financing, putting a real estate asset as collateral.
Characteristics of the Mortgage Bank
- They receive deposits of participations in mortgage loans and in special accounts.
- Its main objective is the granting of credits to acquire, build, expand, reform and improve real estate assets of all kinds.
- They grant guarantees that are linked to operations in which they intervene.
- They can obtain credits from abroad.
- For the above reason, they can act as financial intermediaries of credits obtained in foreign and national currency.
- They can issue mortgage bonds or bonds.
- They are trained to make temporary investments in easily liquidated placements.
In practice, there are no longer only banks of mortgage type, but these have been diversifying their activities towards commercial banks or have been merged or absorbed by the latter, constituting the mortgage part or division of a banking group.