The Key Role of a Mortgage Banker in Home Financing
A mortgage banker is an entity or individual that originates, funds, and sometimes services mortgages, typically using either their own funds or funds borrowed from a warehouse lender. After the mortgage is created, it might be kept in a portfolio or sold to investors. Additionally, servicing the mortgage or selling the servicing rights to another financial institution are key actions mortgage bankers might undertake. A crucial aspect of their business model is earning fees from loan originations, although they seldom retain the mortgage in their portfolio.
Key Takeaways
- Expert Loan Originators: Mortgage bankers are responsible for originating mortgages, leveraging either personal or borrowed capital.
- Fee-Based Revenue: They generate revenue from loan origination fees, often working within a bank or financial institution’s loan department.
- Approval Authority: With the authority to approve or reject mortgage applications, mortgage bankers play a pivotal advisory role, assisting borrowers in finding optimal loan solutions.
- Difference from Mortgage Brokers: Unlike mortgage brokers who facilitate loans for other entities, mortgage bankers use their own or institution-provided capital for origination.
Understanding Mortgage Bankers
Mortgage bankers are typically found in the loan departments of financial institutions such as credit unions, savings and loan associations, or banks. Throughout the mortgage journey—from property assessment to financial data gathering and loan securing—they work alongside realtors and loan seekers. Mortgage bankers not only originate loans but also provide vital advice, helping borrowers navigate the array of loan products offered by the institution to choose the best option.
Because they fund loans in their own names using personal or institutional resources, mortgage bankers are directly tied to their employing institutions’ lending purview. They are usually salaried with the potential for performance bonuses, emphasizing their commitment to ensuring borrowers can meet payment obligations and the loans are substantively secured. Larger banking entities may also engage in loan servicing, while smaller ones often sell servicing rights.
Mortgage bankers have the discretion to grant or deny mortgage applications, their role being crucial when a lender must make subjective decisions or exceptions.
Mortgage Banker vs. Mortgage Broker
While sharing the goal of facilitating home loans, mortgage bankers differ notably from mortgage brokers. Mortgage bankers streamline the process under their names, tapping into personal or institutional funds. Conversely, mortgage brokers act as intermediaries, connecting clients with lenders through a network of external financial institutions. They do not close loans themselves, enabling them to scout various lending options to best suit the borrower’s needs, representing multitude financial entities rather than a singular institution.
Embrace Our Expertise in Home Financing
Mortgage bankers bring a personal investment into the mortgage origination process, marking a distinctive path compared to brokers. Their professional guidance and institutional affiliations make them integral to navigating the complexities of securing home financing.
Related Terms: loan servicing, mortgage broker, credit union, savings and loan association, lending institution.
References
- State of Nevada Department of Business and Industry Division of Mortgage Lending. “Information for Mortgage Brokers and Mortgage Bankers”.
- U.S. Bureau of Labor Statistics. “Loan Officers”.
