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What is the Difference Between a Mortgage Banker and Correspondent Lender
Can someone explain the difference between a mortgage banker and correspondent mortgage lender?
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1 Reply
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A mortgage banker and a correspondent lender are both involved in the mortgage industry, but they operate differently in terms of their roles and functions:
Mortgage Banker:
A mortgage banker is typically a financial institution or company that originates, processes, underwrites, and funds mortgage loans using its own funds or a credit line.Mortgage bankers often work directly with borrowers, taking their loan applications, processing them, and making the final lending decision.After closing the loan, mortgage bankers might continue to service the loan themselves or sell it to investors on the secondary mortgage market.
Correspondent Lender:
A correspondent lender, on the other hand, acts as an intermediary between the borrower and a larger mortgage lender or investor.Correspondent lenders originate and fund mortgage loans using their own capital or credit lines but typically underwrite and close the loans in their own name.However, rather than keeping the loans on their books, correspondent lenders sell them to larger mortgage lenders or investors shortly after closing. These larger lenders may include banks, mortgage companies, or government-sponsored enterprises (GSEs) like Fannie Mae or Freddie Mac.
In summary, the primary distinction lies in how they handle the loans after origination and closing. Mortgage bankers usually retain the loans on their balance sheets or service them, while correspondent lenders typically sell the loans to other entities shortly after closing.