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What is the difference between a mortgage banker and a mortgage broker?

by SRogen from Northridge, California. Nov 28th 2012 Reply


William J Acres (William_Acres)
#1 ranked lender in Arizona - 8,656 contributions

A mortgage bank is a mortgage lender that uses their own funds to fund a loan either through cash in their own account or a line of credit. They don't offer services that other banks do, just mortgage services.. Mortgage bankers are a lot like dealing with your local big bank in a sense, because they are encouraged to run all their deals through their own lines of credit, where they make the most money... Because of this, they tend to be more cautious and won't get involved with the tough deals.. if they fund a deal that has major flaws in it, that mortgage banker might have to "buy back" the loan and carry that loan on their books... this will cost them, since the goal is to fund a loan, and get it sold ASAP... A broker on the other hand does not fund deals on their own lines.. Instead, they have a network of different lenders that they deal with where they seek out the best terms for the borrowers particular scenario.. They most often have lower overhead, and can offer better rates and fees than the mortgage banker or the local big banks.. And because they are not funding the deal on their own lines, they are not encouraged to send deals to one lender or another.. They send them to the lender that will best fit the borrower... There's so much technical differences that would make little sense to explain here, but my explanation above is a good surface description of the major differences... I'm a Broker here in Scottsdale AZ and I only lend in Arizona. If you or someone you know is looking for financing options, feel free to contact me or pass along my information. 480-287-5714 WilliamAcres.com

Nov 28th 2012
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Barb Lanis (BarbLanis)
#70 ranked lender in Illinois - 663 contributions

A mortgage banker is a company that has the ability to process, underwrite, close, and FUND their own loans. Funding is the key word here. It means that a mortgage banker has sufficient capital and company quality in order to obtain large lines of credit to fund the loans that they make. Sometimes, mortgage bankers are also a division of an actual bank. Although, it doesn't mean that a loan wouldn't be ultimately be sold and/or serviced by another company. Again, the key word is Funding. Mortgage Brokers do not fund their own loans. They may process their own loans, but typically do not underwrite. And, brokers certainly do not Fund their own loans. This means that the ultimate lender (i.e. US Bank, Chase) is the one to deliver the funds to closing. There is nothing wrong with either of these choices. Great terms on your mortgage should always be your guide. Best case scenario is a company that has the ability to operate as both a mortgage banker and broker to offer you the best options. Please let me know if you need a referral to a mortgage banker/broker in your area as I have some well respected names to provide. barb.lanis@1amllc.com

Nov 28th 2012
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Bert Carpenter (BertCarpenter)
#38 ranked lender in Arizona - 1,821 contributions

Me thinks William protests too much, probably because he is just a broker. Mortgage Bankers do not use our money to lend to the consumer to make more money, we do it because it is the most efficient way to get a loan approved and funded, and it happens to be cheaper to the customer as well. When you work with a Broker, the loan application and disclosures are specific to the lender the broker selects for you. Since different lenders charge different rates and fees, you are stuck with the program the Broker picks for you. If, after you apply, it turns out that a different lender has a better program, better rates or lower fees, your broker generally must start the disclosure process over to use that lender. Then, once the file is processed, it gets sent to the lender to be underwritten. Your loan is in line behind all of the hundreds of loans from other brokers that have chosen that same lender. A Mortgage Banker does it all in house. Once you apply, we have the ability to use ANY of our investors. Although they are the same financial institutions used by the brokers, WE lend the money and the financial institution purchases the loans from us, so we call them investors. We then get to pick the investor that offers you the best combination of Rate, Fees and Programs. If we need to, or want to switch investors to take advantage of better pricing, we can and do not need to start over. This saves you time and money. Also, our underwriters only work for OUR borrowers, so you do not stand in line behind the hundreds of customers from other brokers. This allows us to process, underwrite, prepare loan docs and fund in extremely short turn times. Oh, perhaps the most important part is that because we do all of the work and the investor simply purchases the loan once escrow has closed, we get better pricing from them than they offer to brokers. This get's passed on to you the borrower.For more, read my blog post here on Lender 411 by following this link: http://www.lender411.com/?gid=mortgage-articles&aid=5737&qid=mortgage-professional-vs-bank-loan-officer&p=1&ps=2500

Nov 29th 2012
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Shashank Shekhar (shashank)
#666 ranked lender in California - 7 contributions

Mortgage Bankers would usually process, underwrite and fund the loans inhouse and then sell the loan to a lender/investor later. Mortgage brokers are intermediary between borrowers like you and several banks. Mortgage bankers have more control of the loan process, while mortgage brokers may have access to more lenders/banks. Hope that helps!

Nov 28th 2012
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Steven Brand (stevenbrand)
#2 ranked lender in Minnesota - 103 contributions

Barb had a great explanation for you that "Great terms on your mortgage should always be your guide." AND that the best choice may be working with an Originator that works at a company that is a Banker with the capacity to Broker if needed. Most lenders on this site will agree that you'll most likely end up with a better overall experience (rates, program options, MI options and transparency) with working with a Licensed MLO at a Banker or a Broker than one of the Registered MLO's that work at the big banks. My branch partner Charles and I originate loans (Banker and Broker) in CA, MN and WI. Check us out yourself: www.iLoanHomeMortgage.com

Nov 28th 2012
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Phil Dumouchel (PhilDu)
#1 ranked lender in South Carolina - 2,240 contributions

It's kind of like the difference between an independent insurance agent and a direct company like State Farm or Nationwide. Really just a different way of doing business. It's usually worth checking around and you will find horror stories about both. I've worked in situations where I had both options and sending a file to another company to approve had definite drawbacks. The easy transactions are easy anywhere, and difficult one's difficult regardless of who is working on it. Brokers have many different lenders they can work with but sometimes they have more trouble getting the deal approved that a direct lender does because many of the larger mortgage investors "trust" their in house loan officers more than someone they have no direct control over. But I have also referred customers to brokers I trust to do a good job that had an option I did not, while I also receive referrals from brokers because I have options they do not... Ultimately some are better at dealing with certain situations that the alternative. Brokers tend to make more money individually than bankers but they also may have higher personal costs because they don't have a large company providing insurance, office space, marketing, etc. Many Brokers tend to have a negative view of Bankers and the other way around but much of that is simply competition there are great people and competitive rates and costs from both. The best comment above was to find a reputable mortgage professional from either category who works for a company with good customer service.

Nov 29th 2012
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Phil Dumouchel (PhilDu)
#1 ranked lender in South Carolina - 2,240 contributions

PS. Most of what you find on this site are mortgage Brokers so there is a frequent recommendation to not use Bankers, especially at the large banks/mortgage companies. Ultimately both are trained much the same way and are professionals. There are problem people who work in both worlds and I believe a true professional never puts down the competition.

Nov 29th 2012
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