Types of Mortgage Lenders

There are a number of types of primary mortgage lenders that you may encounter when shopping for your mortgage loan. To give you a better understanding of these service providers, a brief explanation is provided below.

Mortgage Bankers typically originate loans and then sell these loans to the secondary mortgage market shortly after funding. (The mortgage banker may or may not sell the servicing of the loan.)

Often mortgage bankers have attractive loan programs and rates.

Portfolio Lenders make loans with the institution's own funds and keep the loan on the institutions books rather than immediately selling it to the secondary mortgage market. Many institutions engage in mortgage banking as well as portfolio lending.

Since portfolio lenders fund the loans, they are not confined to Freddie Mac/Fannie Mae guidelines. After a portfolio loan has reached its one year anniversary date without any late payments, it is considered seasoned and may be sold to the secondary mortgage market even if it does not meet Freddie Mac/Fannie Mae guidelines.

If a portfolio loan is sold to the secondary mortgage market, the portfolio lender may continue to service the loan.

Direct Lenders fund their own loans. Direct lenders usually fall into the category of a mortgage banker or portfolio lender.

Correspondents act on behalf of one or several lenders (sponsors) throughout the origination and closing. The loan is usually underwritten by the sponsor. The correspondent acts as the lenders agent. The correspondent may also service the loan for the lender.

Mortgage Brokers work as intermediaries between lenders and borrowers. Mortgage brokers have access to a number of lenders and often offer the most variety in loan programs. Brokers assist the borrower in filling out the loan application, obtaining the credit report and appraisal, selecting a loan program and finding a lender to fund the loan. In general, brokers do not make the decision to extend the loan and do not fund the loan.

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