Different Types of Mortgage Lenders

Mortgage Bankers

They typically originate loans, which they sell directly to Fannie Mae, Freddie Mac, Ginnie Mae, jumbo loan investors, and others. Any company that does this is considered to be a mortgage banker.  They can very greatly in size.  Some may service the loans they originate.  Most true mortgage bankers have wholesale lending divisions.

Portfolio Lenders

An institution, which is lending their own money and originating loans for itself is called a portfolio lender.  This is because they are lending for their own portfolio of loans and not worried about being able to immediately sell them on the secondary market.  Since they fund the loans, they don't have to obey Fannie Mae/Freddie Mac guidelines and can create their own rules for determining credit worthiness. . Usually these institutions are larger banks and savings & loans.  When a portfolio loan has reached its one year anniversary date without any late payments, it can be sold to the secondary market even if it does not meet Fannie Mae/Freddie Mac guidelines.

Direct Lenders

Lenders are considered to be direct lenders if they fund their own loans. A direct lender can range anywhere from the biggest lender to a very small one. Direct lenders usually fall into the category of a mortgage banker or portfolio lender.

Correspondents

Correspondent is usually a term that refers to a company, which originates and closes home loans in their own name, then instead of selling those loans in pools; they sell them individually to a larger lender, called a sponsor.  The sponsor acts as the mortgage banker, re-selling the loan to Ginnie Mae, Fannie Mae, or Freddie Mac as part of a pool.  The correspondent may also service the loan for the lender.

Mortgage Brokers

They work as an intermediate between lenders and borrowers.  They are companies that originate loans with the intention of brokering them to wholesale lending institutions.  The mortgage broker has access to a number of lenders and often offers the most variety in loan programs.  Many mortgage brokers are also correspondents, which is why many of them also claim to be mortgage bankers.  Brokers help the borrower in filling out the loan application, obtaining the credit report and appraisal, selecting a loan program and finding a lender to fund the loan.  In general, they don't fund the loan.

Wholesale Lenders

Most mortgage bankers and portfolio lenders also act as wholesale lenders, catering to mortgage brokers for loan origination. Some wholesale lenders do not even have their own retail branches, relying solely on mortgage brokers for their loans.  They underwrite and fund mortgage loans.

Banks, Credit Unions and Savings & Loans

Banks and savings & loans usually operate as portfolio lenders, mortgage bankers, or some combination of both.  Credit Unions usually seem to operate as correspondents, although a large one could act as a portfolio lender or a mortgage banker.  These institutions may hold the loan in its portfolio or sell it to the secondary mortgage market.