Mortgage Lender
Definition of "Mortgage Lender"
The party advancing money to a borrower at the closing table in exchange for a note evidencing the borrowers debt and obligation to repay. Retail, Wholesale, and Correspondent Lenders: Lenders who perform all the loan origination functions themselves are called 'retail lenders/' Lenders who have certain functions performed for them by mortgage brokers or correspondents are called 'wholesale lenders.' Many large lenders have both retail and wholesale divisions. Wholesale lenders will have different departments to deal with correspondent lenders and mortgage brokers. The division of functions is shown in the table on the next page. Correspondent lenders are typically small and depend on wholesale lenders to protect them against pipeline risk. A correspondent lender locks a price for a borrower at the same time as the correspondent locks with a wholesale lender. Mortgage Banks Versus Portfolio Lenders: Mortgage banks sell all the loans they make in the secondary market because they don't have the long-term funding sources necessary to hold mortgages permanently. They fund loans by borrowing from banks or by selling short-term notes, repaying when the loans are sold. Mortgage banks now dominate the U.S. market. Of the 10 largest lenders in 2002, nine were mortgage banks and only one was a portfolio lender. However, most of the large mortgage banks are affiliated with large commercial banks. Portfolio lenders include commercial banks, savings banks, savings and loan associations, and credit unions. They are sometimes referred to as 'depository institutions' because they offer deposit accounts to the public. Deposits provide a relatively stable funding source that allows these institutions to hold loans permanently in their portfolios. Mortgage banks often offer better terms on fixed-rate mortgages than portfolio lenders, while the reverse is more likely for adjustable rate mortgages. It would be a mistake to place too much reliance on this rule, however, because the variability within each group is very wide.
Popular Mortgage Terms
An independent contractor who offers the loan products of multiple lenders, called wholesalers. Mortgage brokers do not lend. They counsel borrowers on any problems involved in qualifying ...
Also called variable or flexible rate mortgage, an adjustable rate mortgage (ARM) is a mortgage where the interest rate is not constant, but changes over time by the mortgage lender. ...
The amount the borrower promises to repay, as set forth in the loan contract. The loan amount may exceed the original amount requested by the borrower if he or she elects to include ...
A lender who delivers loans to another (usually larger) lender against prior price commitments the larger lender has made to the correspondent. Mortgage brokers sometimes evolve into ...
A facility offered by some lenders to mortgage brokers where de jure the brokers become employees of the lender but de facto they retain their independence as brokers. One of the ...
A payment made after the grace period stipulated in the note, usually 10-15 days. ...
The lender's risk that, between the time a lock commitment is given to the borrower and the time the loan is closed, interest rates will rise and the lender will take a loss on selling ...
Every ARM is tied to an interest rate index. An index has three relevant features:availibility, level, volatility. All the common ARM indexes are readily available from a published source, ...
The specific interest rate series to which the interest rate on an ARM is tied, such as 'Treasury Constant Maturities, One-Year,' or 'Eleventh District Cost of Funds.' ...
Have a question or comment?
We're here to help.