Why would any bank make a fixed rate mortgage?

Banks make all their money on the spread and the fees. It does not matter what the rate is, especially since '30' year mortgages rarely ever go 30 years.

Adjustable rates are extremely dangerous and can encourage consumers that don't necessarily have the long-term funds to purchase mortgages. A fixed-rate mortgage means that you can calculate what you need over a 30-year period to pay off your debt and not have to worry about interest rates hiking at any moment. This is what helped cause the financial crisis in the first place. If one were to purchase a home with an adjust. rate at 1% for the first 5 years, and then it balloons to 6 or 7% five years later, that can make or break an individual on low income or median income. However, with a fixed-rate mortgage, you know the maximum of what you will pay over that 30 year period.

If you decide to refinance, then that's awesome because you will only pay lower than what you original fixed rate was.

The person above me also makes a great point that banks make a lot of money on closing costs, balloon payments, and other fees.

Because a 30 year fixed mortgage has a nominal value today, just like a piece of silver has a given value. When a bank makes a loan, it is making an investment. Some investments work out, some don't. Sure Dodd-Frank has eliminated thousands of mortgage brokers, but rightfully so. The industry had become overloaded with good and bad.

This whole "foreclosure meltdown" and "housing bubble burst" is really just the market going back closer to where it belongs. The root of all these problems is fiat money exacerbated by gross fraud at the highest levels including legislatures. We all pay for it, and when the banks don't make a profit, they screamed "bailout or martial law!"

Dodd-Frank is a diluted piece of legislation that has no teeth, dick, or balls. The legislation will be further negated by regulatory hijacking.

1. 30-year mortgages come with federal guarantees if they meet certain lending requirements. The banks and assignees are able to shift the risk of loss to FNM and FRE, and ultimately the taxpayer.

2. Option contracts and bundling of mortgages allow noteholders to peel away any degree of risk associated with 30-year fixed rate mortgages.

3. 30-year mortgages are part of an enormous and hopefully liquid credit market. Bondholders have a voracious appetite for the federally guaranteed certainty of return that they provide.

4. Each creditor-debtor transaction allows the banks (collectively) to increase their account with the federal reserve ten fold. So, one mortgage means an expansion of their accounts by a factor of ten.

Breaking news
http://mobile.bloomberg.com/news/2012-02...
but it doesn't answer your question.

I don't think "funding" means what you think it means.
When the bank makes a loan, it doesn't go into the vault and use existing money.
It types some amount into the keyboard and creates new money, upon which you pay interest. This alleged new money (which is your debt to them) is counted by them as an "asset". Having this "asset" (your debt) allows the bank to loan 90% of it to others, at interest.

Bottom line: if all loans and debts were paid off, all "Federal Reserve Notes" would have been retired, paid off. But the catch is, what would they have been paid with, since all money is debt?

You're going to need to wrap your head in duct tape to prevent it from exploding if you really want to understand our freaky fractional reserve money system.

I want to know why a bank would ever issue "zero down" loans.

Oh yeah... the democrat's favorite GSEs, Fannie/Freddie. (Who BTW, had the protection of Bawney Fwank when that wacist Bush twied to increase FNM/FRE's capital-reserve requirements.)