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Types of
Mortgage Lenders
It used to be
fairly easy to put a term to a lender that accurately described
them and the types of mortgages they originated. Time, the
S&L problems more than a decade ago, and a maturing marketplace
have served to "blend" those differences. Some old
adjectives barely apply now and are rarely used.
Mortgage
Bankers
A true Mortgage
Banker is a lender that is large enough to
originate loans and create pools of loans which they sell directly to Fannie Mae, Freddie
Mac, Ginnie Mae, jumbo loan investors, and others. Any company that does this is
considered to be a mortgage banker. They can very greatly in size.
Some may service the loans they originate, but not all of them
will. Most true mortgage bankers have wholesale lending
divisions.
Examples of two
of the largest mortgage bankers are Countrywide Home Loans and
Wells Fargo Mortgage. One is associated with a bank
and the other is not, but both are most correctly classified as
mortgage bankers.
A lot of
companies call themselves mortgage bankers and some deserve the
title. For others, it is mostly marketing.
Mortgage Brokers
Mortgage Brokers are companies that originate loans with
the intention of brokering them to wholesale lending institutions. A broker has established
relationships with these companies. Underwriting and funding takes place at the
wholesale lender. Many mortgage brokers are also correspondents, which is
why many of them also claim to be mortgage bankers.
Mortgage brokers deal with lending institutions that have a
wholesale loan department.
Wholesale Lenders
Most mortgage bankers and portfolio lenders also act as
wholesale lenders, catering to mortgage brokers for loan origination. Some wholesale
lenders do not even have their own retail branches, relying solely on mortgage brokers for
their loans.
These wholesale divisions offer loans to mortgage brokers
at a lower cost than their retail branches offer them to the general public. The mortgage
broker then adds on his fee. The result for the borrower is that the loan
costs about the same as if he obtained a loan directly from a retail branch of the
wholesale lender.
copyright 1999 by Terry
Light and RealEstate ABC, modified 2002
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