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
Administering loans between the time of disbursement and the time the loan is fully paid off. Servicing includes collecting payments from the borrower, maintaining payment records, ...
Refinancing that omits some of the standard risk control measures and is therefore quicker and less costly. The rationale for streamlined refinancing is that, while it is an entirely new ...
A written document evidencing the lien on a property taken by a lender as security for the repayment of a loan. The term 'mortgage' or 'mortgage loan' is used loosely to refer both to the ...
Fees assessed by lenders when payments are late. Late fees are usually 4% or 5% of the payment. A borrower with a 6% mortgage for 30 years who pays a 5% late charge every month raises his ...
The ratio of total housing expense to borrower income. This ratio is used (along with other factors) in qualifying borrowers. ...
A mortgage lender that sells all the loans it originates in the secondary market. ...
The interest rate used in calculating the initial mortgage payment in qualifying a borrower. The rate used in qualifying borrowers may or may not be the initial rate on the mortgage. On ...
The sum of all interest payments to date or over the life of the loan. This is not a good measure of the cost of credit to the borrower because it does not include upfront cash payments and ...
Refinancing for an amount in excess of the balance on the old loan plus settlement costs. When the main objective of a refinancing is to raise cash, the relevant question is whether the ...
Have a question or comment?
We're here to help.