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So from where do you access your home mortgage loan? There are as many mortgage institutions as there are the several types of mortgage loans.
Mortgage Bankers – These are financial institutions which are big enough to generate huge pools of money, which they lend to other sub-institutions for marketing the loans. You will find a lot of companies who call themselves mortgage bankers. While some truly deserve the title, many use it purely for promoting their services. Mortgage bankers may vary in size of their operations and usually a large chain of lending divisions. Some may even disburse the loans they originate; some may just be servicing their loans. Countrywide Home Loans and Wells Fargo Mortgage are two big names in the world of mortgage bankers. Fannie Mae, Freddie Mac, Ginnie Mae, etc are names of institutions which could be called wholesale mortgage lending institutions.
Mortgage Brokers – These are companies which generate loans and broker them to wholesale lending institutions, on the basis of a long-standing relationship with such companies. While the underwriting and funding of the loan take place at wholesale lending institutions, the mortgage brokers would usually deal with lending institutions which have wholesale loan departments. Many mortgage brokers are correspondents, which is why they call themselves mortgage bankers.
Wholesale Lenders – There are many mortgage bankers who double up as wholesale lenders who only deal with mortgage brokers for loan generation. Many of these companies do not have retail outlets, since they only deal with the brokers for all loan transactions. The wholesale lending divisions of mortgage bankers offer loans to mortgage brokers at interest rates lower than their retail outlets, for further disbursement to the public. The mortgage broker adds his fees to the money being loaned. The net effect to the borrower is that the cost of the loan is almost the same as if he had borrowed the money from a retail outlet of the wholesale lender.
Portfolio lenders – These are large lending institutions which originate loans and lend their own money to disburse them against their own portfolio of loans. Since they do not have to sell their loans to secondary buyers like Fannie and Freddie, portfolio lenders are governed by their own rules and policies to determine a borrower’s creditworthiness. If a borrower has made the necessary payments for a portfolio loan for a year without ever failing in his commitment, the loan is called a ‘seasoned’ loan. By selling more numbers of ‘seasoned’ loans, the ‘portfolio ‘lender can avail of more loans for selling to the secondary market.
Direct Lenders – When a lender directly funds his own loans, he is called a direct lender. Banks and other financial institutions can re-invest their own funds for loaning purposes for which they use the ‘warehouse lines of credit’. Smaller direct lenders also use the ware house lines of credit to generate their own lending amount. The way you can demarcate a direct lending company is when the loan documents are drawn up in their name – but these days, the smallest mortgage broker can draw up the loan papers in his name.
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