Many institutions that make mortgage loans do not want to hold large portfolios of long-term securities,because it would subject them to unacceptably high interest-rate risk.

Question

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Many institutions, such as banks and mortgage lenders, prefer to sell or securitize the loans they make rather than holding them on their books for long periods of time. This is because interest rates can fluctuate over time, and if rates rise, the value of the long-term securities held by the institution may fall, leading to losses. Therefore, institutions seek to minimize their interest-rate risk by avoiding large portfolios of long-term securities.

Many Institutions That Make Mortgage Loans Do Not Want to Hold