Definition of "Mortgage Lender"

Donna Gentle real estate agent

Written by

Donna Gentleelite badge icon

Berkshire Hathaway HomeServices

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.

image of a real estate dictionary page

Have a question or comment?

We're here to help.

*** Your email address will remain confidential.
 

 

Popular Mortgage Terms

The ratio of total housing expense to borrower income. This ratio is used (along with other factors) in qualifying borrowers. ...

Markets in which mortgages or mortgage-backed securities are bought and sold. 'Whole Loan' Markets Versus Securities Markets: Secondary mortgage markets are of two general types. 'Whole ...

The period between payment changes on an ARM, which may or may not be the same as the interest rate adjustment period. ...

Loan applications that are withdrawn by borrowers, because they have found a better deal or for other reasons. ...

Deceptive practices used by mortgage loan providers and other participants in the mortgage process. Scams by Loan Providers: Lenders and mortgage brokers may employ a number of tricks ...

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 ...

The period over which the interest due the lender is calculated. The interest accrual period may or may not correspond to the payment period. On the annual accrual mortgages in the UK, ...

A mortgage Web site designed to provide leads to lenders. A 'lead' is a packet of information about a consumer in the market for a loan. Lenders pay for leads, and these sites are an ...

The number of months for which the initial interest rate holds on an ARM. ...

Popular Mortgage Questions