What is float revenue?

• A. Interest earned on funds held for a period before disbursement
• B. Fees collected for late mortgage payments
• C. Income generated from property taxes
• D. Revenue from selling mortgage-backed securities

Answer: (A)

Float revenue refers specifically to the interest earned on funds that are temporarily held before being disbursed. In the context of mortgage banking, when funds are collected but not immediately applied to costs or disbursements, they sit in accounts for a certain period. During this time, the institution can earn interest on these funds, which is categorized as float revenue.

This concept is crucial in managing liquidity within financial institutions, allowing them to optimize use of cash flow by leveraging the time funds are held. In contrast, fees for late payments, income from property taxes, and revenue from selling mortgage-backed securities represent entirely different revenue streams and do not involve the interest earnings associated with the temporary holding of funds.