Mortgage Lenders

The term 'mortgage lenders' used to refer to organisations which actually originated the funding for home mortgages, but that is no longer the case. This has resulted in a good deal of confusion in the market, as mortgage lenders now comprise quite a diverse group, with the principal players being as follows:

Mortgage bankers;
Portfolio lenders;
Wholesale lenders;
Mortgage brokers;
Direct lenders; and
Correspondent lenders.

The following is a brief explanation of each type of mortgage lender.

Mortgage Banker

A mortgage banker is an organisation which arranges home mortgages for the purpose of on-selling them in the secondary mortgage market. Some mortgage bankers have relationships with associated companies for actual loan funding, but this is not a requirement for the title. The on-selling of a mortgage by a mortgage banker does not necessarily mean that borrowers cease their relationship with their lender, as some mortgage bankers continue to service the loans which they arrange following a sale.

Portfolio Lender

A portfolio lender is an organisation which itself lends the funds for home mortgages, but which then retains (rather than sells) some or all of those mortgages for investment portfolio purposes. However, a portfolio lender can also be (and usually is) a mortgage banker if it is selling some of its mortgage portfolio on the secondary market. Portfolio lenders often continue to service the loans which they originate.

Wholesale Lender

A wholesale lender is an organisation which originates loan funding but does not deal at the retail end of the market, and consequently does not deal directly with borrowers. Wholesale lenders always deal through a third party such a mortgage broker. A wholesale lender can be either a mortgage banker (by on-selling its mortgages) or a portfolio lender (by retaining some or all of its mortgages).

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