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
The provision of the U.S. tax code that allows homeowners to deduct mortgage interest payments from income before computing taxes. Points and origination fees are also deductible, but not ...
Advice on where to go to get a mortgage. A borrower can always select a loan provider by throwing a dart at the Yellow Pages. A referral is of value if it raises the probability of a ...
The rate charged the borrower each period for the loan of money, by custom quoted on an annual basis. A mortgage interest rate is a rate on a loan secured by a specific property. ...
A payment made by a lender to a mortgage broker for delivering an above-par loan. A par loan is one on which the lender charges zero points. Lenders charge points on loans carrying ...
On an ARM, the assumption that the value of the index to which the interest rate is tied does not change from its initial level. ...
The period used to calculate the monthly mortgage payment. The term is usually but not always the same as the maturity, which is the period over which the loan balance must be paid in ...
The interest rate used to calculate the mortgage payment. The interest rate and the payment rate are often the same, but they need not be. They must be the same if the payment is fully ...
Inserting provisions into a loan contract that severely disadvantage the borrower, without the borrowers knowledge, and sometimes despite oral assurances to the contrary. Prepayment ...
A second mortgage offered at preferential (subsidized) terms to those who qualify. For example, a labor union may offer members who are first-time home buyers a silent second to finance ...
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