Back to Table of Contents

Types of Mortgage Lenders

Mortgage Bankers

Mortgage Bankers are lenders that are large enough to originate loans and create pools of loans, which are then sold 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 that lends their own money and originates 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 a 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 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 additional 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 with which they can fund loans, but they usually use warehouse lines of credit for drawing 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.

Correspondents

Correspondent is usually a term that refers to a company that 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 sponsor usually underwrites the loan.

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 usually operate as portfolio lenders, mortgage bankers, or some combination of both.

Credit Unions usually seem to operate as correspondents, although a large one could act as a portfolio lender or a mortgage banker.

Back to Table of Contents

Thank you for visiting today. If this is your first visit, take your time and look around. We have plenty of information and resources available to you. If you are a return visitor, thank you. We would love to hear from you and tell you how we can serve all your real estate needs.

Tom Scrocco And Randy Isaacs
Realtor - Associates
Coldwell Banker Sunset Strip
 PLEASE CALL US ANYTIME:
310-259-7355 and 310-435-1494

RandyAndTomHomes@gmail.com
BRE: 01245433, BRE: 01252713

Testimonials

From our first meeting Tom and Randy presented a perfect combination of professionalism and personal warmth. Their knowledge of the real estate business is comprehensive, and their concern for my particular needs was exemplary. They guided me through the entire process in language that made things clear to me, and through the entire process to the closing of escrow were available with expert advice and instructions. I cannot recommend them highly enough. C. Steven Smith, Producer
Randy and Tom- “It was a pleasure doing business with you. You made a difficult situation easy and painless! And we couldn't be happier with the price you obtained. Very good job!! We've already recommended you once and will certainly do it again. You were professional, caring, understanding and supportive. We thank YOU from the bottom of OUR hearts! Thank you for getting the best deal for us, including the 60 day stay. We could not have asked for more!” David and Rachelle, Producer
Tom/Randy/Cameron: Thank you all for handling the sale of my parents house in such a professional manner. The Escrow went extremely smoothly without any hitches at all. The personalized attention and advice I got throughout the entire process was second to none.You guys truly are the best. When the time comes for me to sell my own property, I will definitely know who to call. A special thanks to Randy for listening to and working with me through all the “family drama” regarding the sale. Thanks again. Cheryl Marlowe, Traffic Manager KTLA
Tom and Randy...Thank you for the BRILLIANT job you did selling our duplex!...You two possess a unique combination of razor-sharp professionalism and comforting human warmth. You were the best advocates anyone could ever want, and you obtained a better sale than we could ever have imagined. Kristin and Patrick
When we decided to sell our house we met with several real estate agents and it was clear from our first meeting that Randy and Tom were the right choice. They were professional, courteous, and extremely familiar with the local real estate market. During our time working with them on selling our house we found them to be honest, reliable, informative, persistent and always professional. We would use them again in a heartbeat and highly recommend them to anyone looking for a professional real estate partner. Megan Riley Grant, Executive Producer Monster, Andrew Grant, Writer
View All