The mortgage industry is a busy and confusing industry. This is especially true with all the closing companies, mergers, acquisitions going on since the mortgage crash in 2007. Even before 2007, however, the term mortgage lender – along with mortgage broker – have gotten used very loosely by a lot of people in their conversations.
It is important to know the difference between mortgage lender, mortgage banker, mortgage broker, and even mortgage company. Review: What Is A Mortgage Broker? What Is A Loan Officer?
What Is A Mortgage Lender?
Simply put, mortgage lenders provide money for mortgages to consumers from mortgage investors. When you get your mortgage at your loan closing, or loan signing, your mortgage lender lends money to you from their credit line. Each day that your mortgage is on their credit line they pay interest and fees. This credit line is really just like a very large credit card. Because of this, most mortgage lenders sell the mortgages they make pretty quickly after they make them.
The 2007 Mortgage Industry Crash
We are at the very heart of why so many mortgage companies shut their doors in 2007. It seemed like overnight, investors stopped buying loans from mortgage lenders which caught a lot of mortgage lenders off guard. It also stuck a lot of mortgage lenders with extremely full credit lines with no way to get out from underneath them paying fees, interest, and penalties. Mortgage lenders in this position just couldn’t keep up and filed bankruptcy and closed their doors. There were other factors to other companies closing but we’re not going to cover these reasons in this article.
Mortgage Bankers Are Mortgage Lenders Too
Mortgage Bankers are also mortgage lenders. In many states, to get a mortgage banking license a company or even an individual must have higher net worth than what is required for a mortgage broker’s license. There are additional qualifications and licensing requirements for mortgage bankers in most states, but discussing these is beyond the scope of this article.
Mortgage bankers can also operate as a retail company selling mortgages directly to consumers, or they can also get mortgages wholesale from other mortgage companies. I sometimes tell people who ask me what is the difference between a mortgage banker and mortgage broker is that a mortgage banker is a broker on steroids.
Mortgage Lenders Can Go Retail and Wholesale
Mortgage lenders can serve as two functions in home buying and home refinancing. In some cases, they serve as a retail loan company and in other cases they serve as a wholesale loan company. As a retail company they act and feel almost exactly like a mortgage broker. Loan officers for the retail side of a mortgage lender work with consumers to get loans just exactly like they do when they work for a mortgage broker. A mortgage lender operating as a wholesale loan company or wholesale lender gets their loans from mortgage brokers who are working with consumers.
There are some very big companies that work in both of these areas as a wholesale and Retail Company. Some of these include Countrywide Home Loans, Indy Mac Bank (who just shut down in July 2008), GMAC Mortgage, CitiFinancial, Chase Home Loans, and Wells Fargo Mortgage.
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