How banks make money if they sell the loan to the 2nd market?

[Joseph Rohrer]

I have been home loan shopping and looked at a couple different banks. Ill just compare the closest two to make it simple.

Bank 1.....
If I buy $1620 worth of discount points I can get 3.5% on a 30 yr
The main fixed closing costs from the bank are...
-processing fee- $275
-Underwriting fee- $450
-Appraisal- $400
-other random fees- $142

Bank 2......
If I buy $360 worth of discount points I can get 3.5% on a 30 yr
The main fixed closing costs from the bank are...
-Underwriting fee- $395
-Appraisal- $400
-other random fees- $147

Every bank I have checked with sells the loan off to either Fannie Mae or Freddie Mac but they service the loan still. I am trying to wrap my head around how the bank makes money if they just sell the loan off in less than a year. I figure the better I understand it the more successful I'll hopefully be in negotiating the interest and closing costs.

*Do most loan officers get paid a commission?
*Does Fannie Mae or Freddie Mac pay the bank to service the loan?
*If I'm successful in getting a better interest rate, will the bank have a harder time selling the loan to the secondary market?
*Should I focus more on getting them to drop the closing costs or lower the rate?
*Are the fees for discount points benefiting the bank or Fannie/Freddie?
*Are there rules that govern how a bank can hand out mortgages and compete with other lenders?

*Are banks just happy to make money off discount points, closing costs, and servicing the loan, and prefer to sell it off so they can just start up the next loan and sell it off?