Types of Mortgage Lenders
Banks and Savings & Loans
Banks and savings & loans accept deposits and usually operate as portfolio lenders, mortgage bankers or brokers, or combinations of all.
Correspondents
Correspondent is usually a term that refers to a company which originates and closes home loans in their own name, then instead of selling those loans in pools, they sell them individually to a larger lender, called a sponsor. The sponsor acts as the mortgage banker, re-selling the loan to Ginnie Mae, Fannie Mae, or Freddie Mac as part of a pool.
It is almost like being a mortgage broker, except that there is usually a very strong relationship between the correspondent and their sponsor.
Credit Unions
Credit Unions usually seem to operate as correspondents, although a large one could act as a portfolio lender or a mortgage banker.
Direct Lenders
Lenders are considered to be direct lenders if they fund their own loans. A "direct lender" can range from the biggest lender to a very small lender. Banks and savings & loans have deposits they can use to fund loans with, but they usually use "warehouse lines of credit" from which they draw the money to fund the loans. Smaller institutions also have warehouse lines of credit from which they draw money to fund loans.
It used to be able to distinguish a direct lender because loan documents were drawn up in their name, but this is no longer the case. Even the tiniest mortgage broker can fund loans in their own name.
Mortgage Broker
A mortgage broker represents their client to find the best loan from many different sources such as savings and loans, portfolio lenders, credit unions and banks.
Most mortgage brokers use wholesale mortgage banks as their lending source.
Clients usually recieve the most competitive rates from mortgage brokers because the broker seeks the lowest price from many wholesale lending sources and requires a smaller "markup" than large institutions.
Porfolio lenders
An institution which lends its own money and originates loans for itself is called a "portfolio lender". This is because they are lending for their own portfolio of loans and are not conerned with being able to immediately sell them on the secondary market. Because of this, they don't have to obey Fannie/Freddie guidelines and can create their own rules for determining credit worthiness. Usually these institutions are larger banks and savings & loans.
