Types of Mortgage Lenders
Mortgage Bankers
Mortgage Bankers are lenders that are 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.
Some companies don't sell directly to those major investors, but sell their loans
to the mortgage bankers. They often refer to themselves as mortgage bankers
as well. Since they are actually engaging in the selling of loans, there is some
justification for using this label. The point is that you cannot reliably determine
the size or strength of a particular lender based on whether or not they identify
themselves as a mortgage banker.
Portfolio lenders
An institution which is lending their own money and originating loans for itself is
called a "portfolio lender." This is because they are lending for their own portfolio
of loans and not worried about being able to immediately sell them on the
secondary market. Because of this, they don't have to obey Fannie/Freddie
guidelines and can create their own rules for determining credit worthiness. .
Usually these institutions are larger banks and savings & loans.
Quite often only a portion of their loan programs are "portfolio" product. If they are
offering fixed rate loans or government loans, they are certainly engaging in
mortgage banking as well as portfolio lending.
Once a borrower has made the payments on a portfolio loan for over a year
without any late payments, the loan is considered to be "seasoned." Once a loan
has a track history of timely payments it becomes marketable, even if it does not
meet Freddie/Fannie guidelines.
Selling these "seasoned" loans frees up more money for the "portfolio" lender to
make more loans. If they are sold, they are packaged into pools and sold on the
secondary market. You will probably not even realize your loan is sold because,
quite likely, you will still make your loan payments to the same lender, which has
now become your "servicer."
Direct Lenders
Lenders are considered to be direct lenders if they fund their own loans. A "direct
lender" can range anywhere from the biggest lender to a very tiny one. Banks and
savings & loans obviously have deposits they can use to fund loans with, but
they usually use "warehouse lines of credit" from which they draw the money to
fund the loans. Smaller institutions also have warehouse lines of credit from
which they draw money to fund loans.
Direct lenders usually fit into the category of mortgage bankers or portfolio
lenders, but not always.
One way you used to be able to distinguish a direct lender was from the fact that
the loan documents were drawn up in their name, but this is no longer the case.
Even the tiniest mortgage broker can make arrangements to fund loans in their
own name nowadays.
Correspondents
Correspondent is usually a term that refers to a company which originates and
closes home loans in their own name, then sells them individually to a larger
lender, called a sponsor. The sponsor acts as the mortgage banker, re-selling
the loan to Ginnie Mae, Fannie Mae, or Freddie Mac as part of a pool.
The correspondent may fund the loans themselves or funding may take place
from the larger company. Either way, the loan is usually underwritten by the
sponsor.
It is almost like being a mortgage broker, except that there is usually a very
strong relationship between the correspondent and their sponsor.
Mortgage Brokers
Mortgage Brokers are companies that originate loans with the intention of
brokering them to lending institutions. A broker has established relationships
with these companies. Underwriting and funding takes place at the larger
institutions. Many mortgage brokers are also correspondents.
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.
Banks and Savings & Loans - Banks and savings & loans usually operate as
portfolio lenders, mortgage bankers, or some combination of both.
Credit Unions - Credit Unions usually seem to operate as correspondents,
although a large one could act as a portfolio lender or a mortgage banker.
Mortgage Bankers are lenders that are 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.
Some companies don't sell directly to those major investors, but sell their loans
to the mortgage bankers. They often refer to themselves as mortgage bankers
as well. Since they are actually engaging in the selling of loans, there is some
justification for using this label. The point is that you cannot reliably determine
the size or strength of a particular lender based on whether or not they identify
themselves as a mortgage banker.
Portfolio lenders
An institution which is lending their own money and originating loans for itself is
called a "portfolio lender." This is because they are lending for their own portfolio
of loans and not worried about being able to immediately sell them on the
secondary market. Because of this, they don't have to obey Fannie/Freddie
guidelines and can create their own rules for determining credit worthiness. .
Usually these institutions are larger banks and savings & loans.
Quite often only a portion of their loan programs are "portfolio" product. If they are
offering fixed rate loans or government loans, they are certainly engaging in
mortgage banking as well as portfolio lending.
Once a borrower has made the payments on a portfolio loan for over a year
without any late payments, the loan is considered to be "seasoned." Once a loan
has a track history of timely payments it becomes marketable, even if it does not
meet Freddie/Fannie guidelines.
Selling these "seasoned" loans frees up more money for the "portfolio" lender to
make more loans. If they are sold, they are packaged into pools and sold on the
secondary market. You will probably not even realize your loan is sold because,
quite likely, you will still make your loan payments to the same lender, which has
now become your "servicer."
Direct Lenders
Lenders are considered to be direct lenders if they fund their own loans. A "direct
lender" can range anywhere from the biggest lender to a very tiny one. Banks and
savings & loans obviously have deposits they can use to fund loans with, but
they usually use "warehouse lines of credit" from which they draw the money to
fund the loans. Smaller institutions also have warehouse lines of credit from
which they draw money to fund loans.
Direct lenders usually fit into the category of mortgage bankers or portfolio
lenders, but not always.
One way you used to be able to distinguish a direct lender was from the fact that
the loan documents were drawn up in their name, but this is no longer the case.
Even the tiniest mortgage broker can make arrangements to fund loans in their
own name nowadays.
Correspondents
Correspondent is usually a term that refers to a company which originates and
closes home loans in their own name, then sells them individually to a larger
lender, called a sponsor. The sponsor acts as the mortgage banker, re-selling
the loan to Ginnie Mae, Fannie Mae, or Freddie Mac as part of a pool.
The correspondent may fund the loans themselves or funding may take place
from the larger company. Either way, the loan is usually underwritten by the
sponsor.
It is almost like being a mortgage broker, except that there is usually a very
strong relationship between the correspondent and their sponsor.
Mortgage Brokers
Mortgage Brokers are companies that originate loans with the intention of
brokering them to lending institutions. A broker has established relationships
with these companies. Underwriting and funding takes place at the larger
institutions. Many mortgage brokers are also correspondents.
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.
Banks and Savings & Loans - Banks and savings & loans usually operate as
portfolio lenders, mortgage bankers, or some combination of both.
Credit Unions - Credit Unions usually seem to operate as correspondents,
although a large one could act as a portfolio lender or a mortgage banker.
Still have questions? Contact me today for a free
consultation!
consultation!
Colin O’Neal
Buyer’s Agent
200 North Rufe Snow Drive, Ste.102
Keller, TX 76248
(817) 898-0145 Office
(817) 898-1771 Fax
colin@househuntersdfw.com
Buyer’s Agent
200 North Rufe Snow Drive, Ste.102
Keller, TX 76248
(817) 898-0145 Office
(817) 898-1771 Fax
colin@househuntersdfw.com
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