Mortgage Bankers

Mortgage Bankers are essentially lenders that originate, service, and sell their loans in pools to investors such as Freddie Mac and Fannie Mae.  They finance the loans with their own funds, but quickly sell them off on the secondary market.  They essentially act as a liaison between lenders and borrowers.  Countrywide and Wells Fargo are among the largest mortgage bankers in the United States.

Portfolio Lenders

Portfolio Lenders originate and fund their own loans, and may service them for the entire life of the loan.  Because they offer deposit accounts to consumers, they are able to hold onto the loans they fund. They are also able to offer more flexibility in loan products and programs because they don’t need to adhere to the guidelines of secondary market buyers.  Once their loans are serviced and paid for on time for at least a year, they are considered “seasoned” and can be sold on the secondary market more easily.  Washington Mutual is an example of a portfolio lender.

Correspondents

Correspondents originate and fund loans in their own name, then sell them off to larger lenders, who in turn service them, or sell them on the secondary market.  The loans can be underwritten by the correspondent, but the loan programs are usually based on terms approved by the larger lender, or “sponsor”.  Correspondents usually have a array of products from different sponsors, and act as an extension for those larger lenders.  In other words, a small correspondent lender may resell Wells Fargo products or Countrywide products under their own name.

Direct Lenders

A direct lender is simply a bank or lender that works directly with a homeowner, with no need for a middleman or broker.  Mortgage bankers and portfolio lenders usually fall under this category if they have retail institutions.  Examples include Washington Mutual, Wells Fargo and Bank of America.

Wholesale Lenders

Wholesale Lenders are similar to mortgage bankers in that they originate and service loans, and sell them on secondary markets.  Most mortgage bankers have wholesale and retail divisions, although wholesale lenders can be independent entities as well.

A wholesale lender works with independent brokers and loan officers to originate loans.  Brokers and loan officers work on the retail end with borrowers, and once they secure a deal, they send that deal to a wholesale lender for underwriting and processing.  The wholesale lender will fund the loan, and usually sell it on the secondary market within a month or two.  Wholesale lenders have lower rates than retail rates because brokers can manipulate the rate based on their yield-spread-premium.

Mortgage Brokers

Mortgage Brokers work independently with banks and lenders, and borrowers, and need to be licensed.  They usually run small shops in mini-malls or corporate space.  Their job is to contact borrowers and bring in potential deals.  Once they have a deal, they can send it to a mortgage bank or a wholesale lender.  They will need to process the loan once it is approved, and can negotiate pricing with the bank or lender to receive a rebate.  Mortgage brokers will form partnerships with realtors to ensure a steady stream of new business.

Loan Officers

Loan officers work under brokers, and basically do the same thing a broker would do, except they don’t need to be licensed.  They will solicit borrowers using direct mail, telemarketing, and similar practices.  Brokers usually equip them with office supplies and leads, and each take a split of the total commission.  They don’t need any experience, so take caution when one solicits you.