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Originally Posted by OMG!WTF!
It's a bit like WalMart...bulk lending. Lots and lots of loans. Also prime rates and over night rates are much lower so there is still a decent mark up at 2%. Those low 2% rates are usually variable too so the mark up remains even if prime goes up. If you pay out a loan early they often make quit a bit on the payout penalties too. Plus once they have your mortgage in place there is a better chance they will get your other, more lucrative accounts...credit cards, heloc's, personal lines, bank accounts, business loans. The evil genius master plan for the bank is to own your credit so it literally becomes impossible for you to qualify for credit at other banks.
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And that's only for the ones that the bank or lender actually keeps. Mortgages are also insured and then sold off grouped together in Mortgage Backed Securities where the lender makes it's money off of the spread, sort of like a bookie or a casino. So they might return a tiny percentage on the mortgage, but they also don't really have any capital directly invested in it and are acting as more of a middle man. In that case it's more like a commission than a return on investment.