Wholesale Mortgage Lenders
In this type of lending, the wholesale lender is the one that is actually making the loan and whose name typically appears on loan documents. The third party – bank, credit union, or mortgage broker – in most cases is simply acting as an agent in return for a fee.
A wholesale mortgage lender is distinct because it works with independent mortgage brokers, who are client-facing. These brokers work on the retail end with borrowers and handle all correspondence, while simultaneously working with an Account Executive at the wholesale mortgage lender to carry out processing, underwriting, and loan funding. The borrower never actually interacts with the lender, only the broker does.
The wholesale mortgage lender funds the loan, and will usually sell it on the secondary market within a month or two.
Examples include United Wholesale Mortgage, LoanDepot LLC, and Plaza Home Mortgage.
Retail Mortgage Lenders
Retail lenders are exactly what they sound like, lenders who issue mortgages directly to individual consumers. They may either lend their own money or may act as an agent for Again, retail lending may simply be one function offered by a larger financial institution, which may also offer commercial, institutional and wholesale lending, as well as a range of other financial services.
Direct Mortgage Lenders
A direct mortgage lender is a bank or lender that works directly with a homeowner and underwrites their product in-house, without using any kind of middleman or broker. Mortgage bankers and portfolio lenders usually fall under this category if they have retail operations.
Examples include SoFi, Wells Fargo and Bank of America, though smaller entities could share this distinction as well.
Portfolio Mortgage Lenders
Portfolio mortgage lenders originate and fund their own loans, and may service them for the entire life of the loan. Because they typically offer deposit accounts to consumers, they are able to hold the loans they fund on their balance sheet.
They are also able to offer more flexibility in loan products because they don’t need to adhere to the guidelines of secondary market buyers. Once their loans are serviced and paid for on time for at least a year, they are considered “seasoned” and can be sold on the secondary market more easily.
Bank of America, Chase Bank, and Wells Fargo Bank are examples of portfolio mortgage lenders.
Correspondent Mortgage Lenders
A correspondent lender is, in some ways, a hybrid between a traditional lender and a mortgage broker. Correspondent mortgage lenders originate and fund loans in their own name, then sell them off to larger mortgage lenders, who in turn service the loans, or sell them on the secondary market.
Correspondent lenders can lend their own money, but can also shop your mortgage around to other lenders, like a broker. Whether the correspondent lender funds the mortgage directly or shops it out to another lender.
Correspondent lenders can handle loan approval with their own in-house underwriter, but the loan programs are usually based on terms approved by the larger mortgage lender, or “sponsor.”
Mortgage bankers are essentially “mortgage lenders” that originate and sell their loans in pools on the secondary market to investors such as Freddie Mac and Fannie Mae, along with private investors.
If they are non-depository institutions, they finance the loans with warehouse lines of credit extended by other lenders, but quickly sell them off on the secondary market so they can originate new loans. Once the mortgage is made, they sell it to investors and repay the short-term note. Those mortgages that are ‘conventional' (loan sizes under $424,100) are usually sold onward to Fannie Mae and Freddie Mac.
A mortgage broker is a middle man between borrowers and banks who shops around to find a borrower the best rate and fees. While mortgage brokers may handle some of the funding paperwork, the lender is ultimately responsible for underwriting approval.
Mortgage brokers work independently with both banks/mortgage lenders and borrowers, and need to be licensed. Their job is to contact borrowers and bring in potential deals. Once they have a deal, they can send it to a mortgage bank or a wholesale lender. They need to process the loan once it is approved, and can negotiate pricing with the bank, mortgage lender.
We hope this has been an informative way for you to learn more about the different types of mortgage lenders you will come across as your search for a home loan begins. If you'd like to ask any questions, feel free to email [email protected] or visit stemlending.com/contact-us.