Are you thinking of buying a home in the state of Alabama? Then you might want to learn more about various the types of mortgage lenders you will find these days. There was a time when it was fairly simple to figure out what a mortgage lender did and what types of mortgages originated from them. But things have changed in recent years, aided no doubt by the S&L problems of the 1980s, as well as the realities of a maturing marketplace and the natural evolution of time. Some of the old descriptions that were generally applied to mortgage lenders in the old days are all but extinct in the here and now.
First off, nowadays you have mortgage bankers. Mortgage bankers are those lenders that are big enough to originate loans and then create loan pools, which they then sell off to a larger institution, such as the FNMA (Federal National Mortgage Association), the GNMA (Government National Mortgage Association), or the FHLMC (Federal Home Loan Mortgage Corporation.) They might also sell to a major loan investor. Companies that do this are called “mortgage bankers.” Mortgage bankers vary in size. Some mortgage bankers will service the loans they originate; others do not. If it is a veritable mortgage banker, then they will most likely have various wholesale lending divisions. Wells Fargo Mortgage and Countrywide Home Loans are two of the biggest mortgage bankers. While one is associated with a bank, the other isn’t. Still, both of them can be correctly called mortgage bankers. Keep in mind that not every company that sells itself as a mortgage banker really is one. For a lot of these companies, it is merely a marketing ploy.
Secondly, there are mortgage brokers. This type of company will originate a loan in order to then broker it to a wholesale lending institution. The broker will have previously established working relationships with such institutions. The wholesale lender deals with the funding and underwriting parts of the operation. Sometimes a mortgage broker will also perform the role of a correspondent, thus enabling them to advertise themselves as mortgage bankers. The lending institutions that mortgage brokers deal with are ones that have wholesale loan departments.
Finally, we have wholesale lenders. It is true that the vast majority of portfolio lenders and mortgage bankers simultaneously serve as wholesale lenders. This type of lender caters to mortgage brokers for the purpose of originating loans. A lot of wholesale lenders don’t even have their own retail branches. Instead, they rely totally upon mortgage brokers for their loans. Mortgage brokers are offered loans by these wholesale divisions at a much lower cost than they are offered to the general public via retail branches. A fee is then added on by the mortgage broker in order to make it profitable. For the borrower, then, in the end the loan costs just about the same as it would had he or she borrowed the loan directly from one of the wholesale lender’s retail branches.