What are the differences between these mortgage professionals and why is it important? We will try to shed some light on their roles and how they affect you, the borrower. Let’s start by looking at how loan officers and mortgage brokers differ from lenders. Show
Mortgage BrokersMortgage brokers can be thought of as independent consultants who match you with a lender. They find new customers, counsel them on appropriate loans, shop for lenders, and process the loan. The processing includes gathering data including credit checks, appraisals, and employment verification. Once the loan is processed, it is sent it to a lender who funds the loan. Brokers have ties to multiple banks so they can shop across many lending sources for lower rates. They usually make their money by marking up rates they get from lenders, adding fees to the loan, or a combination of the two. Loan OfficersLoan officers are typically employed by lenders or mortgage brokers. They find new clients, counsel borrowers on how to choose the best mortgage, and fill out loan applications. They typically make their money through commissions on the loans. Loan officers can also be mortgage brokers if they also process and broker loans. Loan officers are sometimes called mortgage consultants, mortgage loan originators, home loan consultants, and mortgage planners. Lenders are the ones who front the money to fund your loan. Lenders have various names based on how they acquire their clients and what they do with your loan after it is funded. Retail vs. Wholesale Lenders (how customers are acquired
Mortgage Bankers vs. Portfolio Lenders (what happens to your loan)
Correspondent LendersCorrespondent lenders are a mix between brokers and lenders. They technically fund loans with their own borrowed money but typically lock in rates with wholesale lenders at the same time. This mitigates their risk since they can quickly turn around and sell the loan. What type of mortgage professional is best?The type of professional does not matter as long as you get the rate, fees, and loan you were promised. You should be more concerned about finding the lowest rate and fees, as well as working with someone you trust. Where can you find the best rates?It depends. The lender with the lowest rate could change daily. Using a broker may help you find the lowest rate and fees since they can search multiple lenders (similar to how Expedia searches multiple airlines). However, the lowest rate may be at a bank not connected to the broker or may only be found at a given bank’s website (in the travel analogy, this would be like Southwest or NWA who always have their best rates on their own sites). To search across thousands of loan officers, mortgage brokers, mortgage banks, savings and loan companies, and credit unions, you can use Zillow Mortgage Marketplace. This service allows you to compare quotes and fees side-by-side, across a broad range of lenders, so you find the best value. I recommend starting your search there since it is free and anonymous, and then consulting your local bank or mortgage broker to see if they can compete with the rates on Zillow Mortgage Marketplace. December 22, 2000 "What is the difference between a lender and a mortgage broker?" The lender is the one who provides the money to the borrower at the closing table. In exchange, the lender receives a note evidencing the borrower's debt and obligation to repay, plus a lien on the subject property. Mortgage brokers do not lend. They are independent contractors who offer the loan products of multiple lenders, called wholesalers. A broker finds potential customers and counsels them on the loans available from different lenders. They also counsel on any problems involved in qualifying for a loan, including credit problems, take the borrower's application, and usually process the loan. Processing includes compiling the file of information about the transaction, including the credit report, appraisal, verification of employment and assets, and so on. When the file is complete, it is handed off to the lender, who funds the loan. Lenders who perform all the loan origination functions themselves are called "retail lenders". Lenders who have certain functions performed for them by mortgage brokers are called "wholesale lenders". Many large lenders have both retail and wholesale divisions. The division of functions is shown below.
The term "direct lender" is one that small lenders sometimes use to distinguish themselves from mortgage brokers. Loan officers are employees of lenders or mortgage brokers. Loan officers find, sell and counsel customers, and take applications. Loan officers employed by mortgage brokers may also be involved in loan processing. In the case of a one-person mortgage broker firm, that person is both the broker and the loan officer. While loan officers are employees, they act more like independent contractors. They are compensated largely, if not entirely, on a commission basis. The typical commission rate is 1/2 of 1% of the loan amount, and successful loan officers earn 6 figure incomes. Both lenders and mortgage brokers post prices with loan officers to be offered to consumers. The loan officers usually have limited discretion to reduce the price if necessary to meet competition, and full discretion to raise the price if they can. The difference between the posted price and the price charged the consumer is called an "overage", and it is usually shared with the loan officer. Reasonably astute shoppers will probably do better dealing with a mortgage broker than with a lender. Because mortgage brokers deal with multiple lenders, they can shop for the best terms available on any given day. In addition, they can find the lenders who specialize in various market niches that many other lenders avoid, such as loans to applicants with poor credit ratings. On the other hand, the risk of encountering a rogue who will trick you into paying more than you should is higher among mortgage brokers than among lenders. Borrowers can guard against rogue brokers by selecting an Upfront Mortgage Broker (UMBs). Conventional mortgage brokers add a markup to the wholesale prices of lenders to quote an all-in price to consumers. UMBs in contrast charge a specified fee for their services, and pass through the wholesale prices to the consumer. There is little risk of chicanery in dealing with UMBs. Lenders are further distinguished as "mortgage bankers" or "portfolio lenders." Mortgage bankers 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 US market. Of the 10 largest lenders last year, 9 were mortgage banks and only one was a portfolio lender. However, many of the large mortgage banks, such as Chase Manhattan Mortgage and Wells Fargo Mortgage, 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. Washington Mutual, a savings bank, is the only depository on the list of the 10 largest mortgage lenders. 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. What is another name for loan officer?They go by many names, including mortgage bankers, mortgage consultants, etc. Though the names are often interchangeable, it is important to remember the difference between a loan officer and a mortgage broker.
What's the difference between a loan originator and a mortgage broker?The main difference between these titles is that Mortgage Brokers are employed by a Sponsoring Broker, while Mortgage Loan Originators and Officers are employed by a bank or mortgage company. Both Mortgage Brokers and MLOs are licensed nationally by the Nationwide Multistate Licensing System (NMLS).
What is an originator in banking?(c) "Originator" means the sender of the first payment order in a funds transfer. (d) "Originator's bank" means (i) the receiving bank to which the payment order of the originator is issued if the originator is not a bank, or (ii) the originator if the originator is a bank.
Whats the difference between a loan officer and?A loan officer works for a bank, a credit union, or another mortgage lender, and will offer only the programs and mortgage rates that are available from that institution. A mortgage broker works on a borrower's behalf to find the best rate and loan from a number of institutions.
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