How are banks able to offer rebates and special packages?
Answer:
If you are talking about mortgage financing, the answer is, in most cases, related to the pricing the lender is offered based upon their commitment deliveries to their investor. Mortgage investors enter into commitments with lenders at various rates(i.e. a lender may get a commitment from Fannie Mae to deliver 20 million in loans at 7%, 7.125%, 7.25% etc.) Each of those rates is attached to a different pricing. So while 7.25% may be a par (no buy down) 7.25% may offer the lender a pricing incentive of say .375%. The lender may then choose to pass that pricing incentive on to borrowers to generate business.
In some cases lenders may waive some fees to accomplish the same thing and advertise that as a rebate.
Special packages are negotiated with the investors. Lenders with high delivery rates (lots of loans) have an advantage in that market which is why you see more special packages offered by mortgage banks and national banks.
How do they do this? By overcharging on simple everyday items that are done in the bank , from ATM transactions, to some banks even charging now if you see a live teller. Have you ever seen what they charge for a bounced check and then they will continue to take that check back day after day after, until you are so far into the hole that you can't climb out without help.
You pay for it on the back end with higher fees & lower interest on deposits or higher interest on loans. They aren't offering the promotions that are expected to lose money.
Just like any other business- they have rebates tincrease business or run loss leaders in the hopes of you purchasing something else .
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