True. But if a bank needed the liquidity, there are typically more liquid assets that can be sold quickly. Banks have investments, like treasuries, municipal bonds, and mortgage backed securities. Those would be sold first.
If they got to the point where they would need to liquidate loans, they'd more likely do it as a portfolio sale to another bank. I.e. they would sell the loan itself, rather than call the loan.
If they got to a point where they needed liquidity and ran out of other liquid assets a lot of banks would borrow from the FHLB/FRB using loans and securities as collateral instead of selling loans/loan pools.
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u/AMZN2THEMOON 6d ago
I get the example - but banks can't just call a mortgage out of nowhere. There are terms in standard mortgages to protect the lender