Types Of Mortgage Lenders

< b>Mortgage Bankers          An institution which is lending                                    their own money and originating    Mortgage Bankers are            loans for itself is called a       lenders that are large enough to      "portfolio lender." This is        originate loans and create pools      because they are lending for       of loans which they sell directly     their own portfolio of loans and   to Fannie Mae, Freddie Mac,           not worried about being able to    Ginnie Mae, jumbo loan investors,     immediately sell them on the       and others. Any company that does     secondary market. Because of       this is considered to be a            this, they don't have to obey      mortgage banker.                      Fannie/Freddie guidelines and can                                        create their own rules for         Some companies don't sell             determining credit worthiness.     directly to those major               Usually these institutions are     investors, but sell their loans       larger banks and savings & loans.  to the mortgage bankers. They                                            often refer to themselves as                                             mortgage bankers as well. Since       Quite often only a portion of      they are actually engaging in the     their loan programs are            selling of loans, there is some       "portfolio" product. If they are   justification for using this          offering fixed rate loans or       label. The point is that you          government loans, they are         cannot reliably determine the         certainly engaging in mortgage     size or strength of a particular      banking as well as portfolio       lender based on whether or not        lending.                           they identify themselves as a                                            mortgage banker.                      Once a borrower has made the                                             payments on a portfolio loan for   Portfolio lenders              over a year without any late                                             payments, the loan is considered   to be "seasoned." Once a loan has     from which they draw the money to  a track history of timely             fund the loans. Smaller            payments it becomes marketable,       institutions also have warehouse   even if it does not meet              lines of credit from which they    Freddie/Fannie guidelines.            draw money to fund loans.                                                                                   Selling these "seasoned" loans        Direct lenders usually fit into    frees up more money for the           the category of mortgage bankers   "portfolio" lender to make more       or portfolio lenders, but not      loans. If they are sold, they are     always.                            packaged into pools and sold on                                          the secondary market. You will        One way you used to be able to     probably not even realize your        distinguish a direct lender was    loan is sold because, quite           from the fact that the loan        likely, you will still make your      documents were drawn up in their   loan payments to the same lender,     name, but this is no longer the    which has now become your             case. Even the tiniest mortgage    "servicer."                           broker can make arrangements to                                          fund loans in their own name       Direct Lenders                 nowadays.                                                                                                   Lenders are considered to be          Correspondents              direct lenders if they fund their                                        own loans. A "direct lender" can      Correspondent is usually a term    range anywhere from the biggest       that refers to a company which     lender to a very tiny one. Banks      originates and closes home loans   and savings & loans obviously         in their own name, then sells      have deposits they can use to         them individually to a larger      fund loans with, but they usually     lender, called a sponsor. The      use "warehouse lines of credit"       sponsor acts as the mortgage       banker, re-selling the loan to        lending institutions that have a   Ginnie Mae, Fannie Mae, or            wholesale loan department.         Freddie Mac as part of a pool.                                           The correspondent may fund the        Wholesale Lenders           loans themselves or funding may                                          take place from the larger            Most mortgage bankers and          company. Either way, the loan is      portfolio lenders also act as      usually underwritten by the           wholesale lenders, catering to     sponsor.                              mortgage brokers for loan                                                origination. Some wholesale        It is almost like being a             lenders do not even have their     mortgage broker, except that          own retail branches, relying       there is usually a very strong        solely on mortgage brokers for     relationship between the              their loans. These wholesale       correspondent and their sponsor.      divisions offer loans to mortgage                                        brokers at a lower cost than       Mortgage Brokers               their retail branches offer them                                         to the general public. The         Mortgage Brokers are companies        mortgage broker then adds on his   that originate loans with the         fee. The result for the borrower   intention of brokering them to        is that the loan costs about the   lending institutions. A broker        same as if he obtained a loan      has established relationships         directly from a retail branch of   with these companies.                 the wholesale lender.              Underwriting and funding takes                                           place at the larger institutions.     Banks and Savings & Loans   Many mortgage brokers are also        - Banks and savings & loans        correspondents.                       usually operate as portfolio                                             lenders, mortgage bankers, or      Mortgage brokers deal with            some combination of both.                                                one could act as a portfolio       Credit Unions - Credit         lender or a mortgage banker.       Unions usually seem to operate as                                     correspondents, although a large       About the Author: Bruce McClellan owns Pinnacle Real Estate of Saratoga, New York - properties and Rentals in Saratoga Springs, Malta, and Albany - forum, articles, and real estate dictionary to get you started. 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