Personal Finance and Investing

the originator likely won't have the mortgage for more than a few weeks, tops. it will go into some big pool so investors get nice diversification. plus, mortgages are rarely underwater (i.e., the house typically remains worth more than the amount owed on the loan, unlike car loans or furniture loans, for example) so it's very hard for the investor to lose money (again, barring some macro-economic disaster).

besides, after getting say 5 years of interest, they will have generated enough profit to cover a reasonable loss even if they then have to foreclose and possibly sell at a loss. a lot has to go wrong, and relatively quickly, in order for an investor to lose money.