Yeah, that was my reaction too. But ... why not? It still seems possible. I mean, between banks they definitely have to mark it to market in order to sell the mortgage, so they would take a big hit to sell when interest rates go up.
So, why can't you put on a funny hat and glasses, get a new mortgage at the higher rate, and then go buy your existing one at a discount?
If you’re “trading” the mortgage, you mark to market, but if you hold it for investment then you don’t (this is driven by bank capital requirements - if I need to go raise capital every time interest rates went up that would create huge problems (despite the credit staying the same (if not improving))
The person is describing a bond loan. They're not offered in most countries.