Basically speaking, the mortgage industry is comprised of three distinct models of mortgage lending operations: Mortgage Brokers, Mortgage Bankers, and Retail Banks.
Mortgage Bankers often operate in a very similar fashion to mortgage brokers. The difference is that they typically secure several “warehouse lines of credit,” oftentimes provided by the large banks, which allows them to have direct control over the entire loan process. They, in turn, underwrite, approve and fund the loan in their name just like a bank. Sometimes, but not all the time, the loan is sold to one of several large banks/investors who have agreed in advance to purchase the loan, which allows the warehouse line of credit to be repaid so they can continue to originate new loans. Because Mortgage Lenders have a larger volume, they are able to secure even better pricing/rates from the end investors, allowing them to cover the additional cost of the staff necessary to control the loan process from start to finish. Therefore, at the end of the day, assuming they run an efficient operation, Mortgage Bankers provide comparable rates to that of the mortgage broker.
Mortgage Brokers are much like independent insurance agents. They have access to many different lenders and many different loan programs. They typically work through the “wholesale side” of the larger banks, which allows them to sometimes secure more aggressive mortgage rates for clients, and act as the “middleman” by packaging and presenting individual loans to the lender to ensure that all banking regulations and underwriting guidelines are met timely to effect a smooth mortgage process. They challenge is that when you work with a Mortgage Broker, you are then subject to not just Fannie Mae and Freddie Mac guidelines, but also the additional overlaid guidelines of all the possible buyers of your mortgage…because when working with a Mortgage Broker, there is an extremely high likelihood that your loan will get sold.
Last are Retail Banks, the institutions allowing direct access from the end consumer to apply for a loan on their own; i.e., Chase, Bank of America, etc., hence the term “retail.” Translated, that simply means higher interest rates and dismal costumer service for the end consumer, as anyone who has traveled the Retail Bank road can attest. (It’s kinda why Mortgage Brokers were invented in the first place…consumers got tired of being taken advantage of by banks so somebody created a better business model to create more choice for the consumer).
Give us a call to chat more…humbly, we have the luxury of not having to chase transactions like typical Realtors, because frankly we have more than enough…which in turn provides us the distinct and privileged freedom to chase relationships…
Look forward to talking with you soon – 303.946.1840. Cheers!