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Mortgage Broker vs Mortgage Banker Vs Bank. "What you talking bout Willis?"

By
Mortgage and Lending with Funky Quail Vintage

 

Recently, I have been noticing a LARGE number of blogs on AR and other sites, talking about TOPICS in the Mortgage Business, and it is clear to me that the general public, as well as Professionals within our industry, are not noticing the differences of perspective that these blogs are coming from!  Soooo....I am going to TRY and simplfy it for everyone!  I by the way, have been all three of them!

 

 Mortgage Broker

 

The "matchmaker" between a homebuyer and/or person refinancing their home, and a lender with the goal of originating a mortgage loan. The Broker draws from a pool of various lenders to find the right match for the customers needs, interest rate, & terms.

 

 

 Furthermore, the BROKER generates an application, credit report, AUTOMATED underwriting, gathers income documents from the customer, orders the titlework & appraisal, fills out countless submission forms, and then submits a "loan package" to the chosen funders Underwriter!  Then, we wait...like a Big Cat, stalking it's prey!  No, just kidding...but we do wait, and wait, and wait, and wait, and wait, and wait, and wait, and wait, and wait,....until the Funder (for example Wells Fargo), gets around to looking at and approving the loan.   Advantage to being a broker, no burden of responsiblity, once the loan is closed!  Dis-advantage - lack of timing and control,

 

Don't confuse a mortgage banker with a mortgage broker. The distinction lies in the fact that a mortgage banker originates and services the loans whereas a mortgage broker only brings the two parties of a loan together.

 

 

 

  MORTGAGE BANKER

 

 A company, individual, or institution that originates, sells and services mortgage loans.

Additionally, they do ALL the same things a Mortgage Broker does except they also have their own underwriters some of which are ONSITE, still have to follow the new HVCC rules, but often times actually have a little bit better pricing on loans!

However, and here is where it gets HUGE...they DO HAVE the burden of responsibility in that if EVERYTHING they approve for the funder is NOT on the "up & up, they will be forced to buy back the loan!  This is NOT good!  Many Mortgage Bankers are not set up to actually SERVICE loans as the definition above states!  Also, they intially close these loans (most times)in their own name on what is called a "WAREHOUSE LINE".  This warehouse line is similar to a Line of Credit any normal customer might take out, with the exception that it is in the MILLIONS OF DOLLARS...rather than thousands!  When a loan is re-purchased due to bad information given to the funder, that loan then goes BACK AGAINST that Line of Credit, and means that is one more loan that company cannot close until they get it off of there!  Wow....does that make sense?? I hope so...as I dont want to say it again!! Argghhh...Advantage to being a Mortgage Banker, slight pricing adjustment, in house underwriter, many times they are much quicker, and can make fairly quick adjustments to loan amounts and terms should the need arise!  Dis-advantage - RISK!

 

BANKS 

There are TWO TYPES!

 

1.  The Bank that OWNS the Mortgage Company or Servicer.  This is the type that most people refer to in their blogs!  For example, IndyMac, Bank of America,Wells Fargo,& Washington Mutual.  Lenders that work with Mortgage Bankers & Brokers. 

2.  A Bank that doesnt have a HUGE Mortgage Origination arm or division. Regional ones primarily,that include companies like Associated Bank that do Mortgages, but dont work with Broker and/or Mortgage Bankers!  They do however retain deposits, and are your everyday bank!

Advantage - Ability to do "in house" loans, as well as immediate TRUST by consumers!  Dis-Advantage- Price, Fees, and Rate Control

   There are also CORRESPONDENT LENDERS.  A Mortgage Broker OR Mortgage Banker can also be a Correspondent Lender to one of many funders, and their "TERMS" or buy back agreements vary based on the nature of their business relationship.  The difference with this program is more RISK for the Mortgage Broker, but better pricing.  For the Mortgage BANKER, they close the loan immediately in the name of the Funder they are placing the loan with, and dont have to place the loan against their warehouse line, or line of credit!

Lastly, here is a really good description of what a Mortgage Servicing Companies role is. 

Loan servicing companies handle the operational aspects of mortgage lending. They collect mortgage payments, credit those payments, send reminders when payments are overdue, assess late charges, establish escrow accounts for the payment of taxes, hazard and flood insurance, and private mortgage insurance. They pay out taxes and insurance premiums when due, and account for all of the above to the investors who own the loans. They also are responsible for managing loss mitigation when a loan gets in trouble. This can include collection activities, loan workouts, and, if necessary, foreclosure. Some even manage the foreclosed property.

 

 

 

 I sure hope this helps!   I would encourage everyone to link back to this at any time, or Re-blog it also at any time!  I believe it is a very "straight to the point" breakdown of the different roles within our industry!

As always, I am sure people will have questions or corrections to suggest, so PLEASE email them to me at Darin@osmwi.com.  I can also be reached at 608-592-2227

 

Proudly serving the State of Wisconsin since 2003

Larry Bettag
Cherry Creek Mortgage Illinois Residential Mortgage License LMB #0005759 Cherry Creek Mortgage NMLS #: 3001 - Saint Charles, IL
Vice-President of National Production

Good to point out the differences for Joe Q. Public.  They often don't know the diff....thanks Darin.

May 06, 2009 02:11 PM
Darin Osenberg
Funky Quail Vintage - Nashville, TN

Larry-  Thanks for noticing!

I think JOE Q or his brother JOHN Q Public is what MOST OF US should be concerned about!  truly!  Making sure consumers understand is VERY important in my daily regiment!

Thanks for commenting!

Darin

May 07, 2009 03:39 AM