Mortgage brokers’ funding sources are Fannie/Freddie/VA/ FHA via an “aggregator” to Wall Street hedge funds.
The “investor’s role” is to “QC’ (quality control) every minute detail of the file; to comply with Fed and State regulations and accounting procedures and, most importantly, FRAUD!
Mortgage bankers (aka “direct lenders”) are just labels for lenders who affiliate themselves with banks.
The creation of this label is just a “branding term” designed to “convey lender control” to agents and buyers, which is rarely the case.
One feature the author, Ms. Sweeney, does not note is that mortgage bankers provide valuable “niche” loan products that mortgage brokers don’t or don’t do well.
These loans are commercial loans, construction loans, land loans, and downpayment assistance funding. Enjoy the post.
A Comparative Guide to Mortgage Brokers and Bankers
and Why Knowing the Difference Between Them Matters
BY KATIE SWEENEY November 06, 2023
Let’s start by defining the terms. A mortgage banker works for one specific financial institution, like a bank, credit union, or non-bank lender.
They lend money directly to buyers and use their employer’s financial resources, but they only offer the products and interest rates of that specific lender.
On the other hand, mortgage brokers advocate for borrowers’ mortgage needs with various lenders. They help offer borrowers various loan programs with tailored mortgage resources and interest rates from many different lenders.
Because mortgage brokers are independent of a single lending institution, they can shop around for the borrower and have access to wholesale rate sheets and sharper pricing.
Sources of Funding
Mortgage Banker: Originates and funds loans with their institution’s resources.
Mortgage Broker: Originates loans that are funded directly by the lender that the borrower’s loan is placed with.
Loan Options
Mortgage Banker: Offers loans from their specific institution, limiting choices for borrowers.
Mortgage Broker: Provides access to a wide range of loan options from multiple lenders, offering more choice.
Interest Rates
Mortgage Banker: Typically offers rates specific to their institution, with limited negotiation.
Mortgage Broker: Can often provide more competitive interest rates by leveraging their entire network of lenders.
Service Personalization
Mortgage Banker: Might need more flexibility in customizing loan offerings to individual needs.
Mortgage Broker: Focused on personalized service, tailoring loan options to each borrower’s unique situation.
Competition
Mortgage Banker: Less competitive as they represent a single institution, which may lead to higher rates or fewer loan options.
Mortgage Broker: Fosters competition among lenders in their network, often resulting in better rates and terms.
Complex Situations
Mortgage Banker: There may be limitations in working with borrowers with non-standard financial situations.
Mortgage Broker: Have access to lenders specializing in unique scenarios and can find solutions for diverse financial profiles.
Loan Process
Mortgage Banker: Handles the entire loan process internally, which can lead to a greater customer service disparity depending on the specific lender’s speed and experience.
Mortgage Broker: You can utilize a lender that prioritizes speed, experience, and/or service if the transaction calls for it.
Borrower Representation
Mortgage Banker: Represents the interests of their specific institution, which may or may not align perfectly with the borrower’s needs.
Mortgage Broker: Represents the borrower’s interests and finds the most suitable loan options from different lenders.
Regulation and Licensing
Mortgage Banker: Subject to their state’s regulations, the loan officer may not be individually licensed because they are often new(er) hires.
Mortgage Broker: Also subject to state and federal regulations and licensing, they must comply with additional guidelines for brokering loans.
Fee Structure
Mortgage Banker: May charge loan origination fees or other costs, with terms set by their institution.
Mortgage Broker: Charges fees, but they often have flexibility in negotiating these fees and can potentially save borrowers money.
Consumer Choice
Mortgage Banker: Offers limited choices, resulting in less competitive terms.
Mortgage Broker: Provides consumers with more options, encouraging borrowers to make well-informed decisions.
