Mortgage Lenders

Mortgage Broker

A mortgage broker is an organisation which does not itself lend funds for home mortgages, but which arranges mortgages with a mortgage banker, a portfolio lender or some other source such as a wholesale lender. Mortgage brokers act as agents between borrowers and lenders, and consequently their role is ostensibly more advice-oriented from the borrower's perspective than that of mortgage bankers or other lenders. However, borrowers need to be somewhat circumspect on this point as mortgage brokers cannot claim to be truly independent - not if they receive compensation (as they invariably do) from the other party to the negotiations, namely the mortgage lender.

Direct Lender

A direct lender is not strictly a separate category of lender but a qualifier to the other categories of mortgage lender. A direct lender is a mortgage lender which lends in its own name, even though the funds for that lending might have been sourced from lines of credit established with other lending institutions. Some mortgage brokers are now offering loans in their own name by having similar lines of credit with lending institutions, but it is important to be clear that when mortgage brokers act in this way they are not acting as brokers but lenders. Some commentators do not agree that brokers are lenders when they behave in this manner, for the reason that they enter into mortgage sale contracts contemporaneously with the borrower's contract, and that consequently the broker is not in fact risking its own capital. That is a rather generous interpretation to the brokering fraternity.

Correspondent Lender

A correspondent lender is a relatively recent term which applies to organisations which are able to authorize loans on behalf of a mortgage lender. Many correspondent lenders are (or were) mortgage brokers which have developed very close and preferred relationships with mortgage lenders. A characteristic which distinguishes correspondent lenders from mortgage brokers and other lenders is that they tend to individually sell the mortgages which they arrange rather than pooling them with other mortgages for resale.

The above are the principal types of mortgage lenders. Each has its own functions and each has its own particular advantages to offer to prospective borrowers.