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What Is The Difference Between A Mortgage Broker And A Mortgage Banker?

By Kevin Landis

Understanding the differences between a mortgage broker and a mortgage banker are difficult because they both perform many of the same functions.

Below are described differences.

Description of a Mortgage Broker:

A mortgage broker acts as an intervening agent between the borrower and the lender. The mortgage broker receives a fee for all approved mortgages submitted to the mortgage banker. These fees are disclosed to the borrower prior to closing. They have access to more wholesale capital markets and are very competitive. They can obtain and get loan approvals from the Secondary Market such as: Fannie Mae and Freddie Mac. Mortgage brokers are regulated under federal enforcement agencies and/or state laws or licensing bureaus. They are also held personally liable for the life of the loan if a fraud is discovered. This is punishable by either revocation of their license or imprisonment. Mortgage brokers are not required to hold a fiduciary relationship.

Description of a Mortgage Banker:

This is an actual bank that will originate and service all their mortgage loans. The mortgage banker will actually finance the mortgage loan with its own funds or obtain a line of credit. They are not federally regulated and do not take deposits like traditional banks. They will, however, sell your loan shortly after closing into the Secondary Market such as: Fannie Mae or Freddie Mac. The mortgage banker is not required to inform you of how much they sold your loan for or the profit that they made. They are, however, required to inform you of the sale of the loan in writing.

The Federal Reserve has made some changes to the mortgage industry to help protect the consumer from fraud or predatory lending practices. These changes include the Mortgage Disclosure Improvement Act (MDIA) and the Home Valuation Code of Conduct (HVCC).

Related posts:

1. Should I Use A Mortgage Broker Or Banker To Find The Best Rate?
2. Will A Mortgage Broker Be Able to Find Me A Better Mortgage Rate?
3. How Do Mortgage Broker Float Loan Rates?
4. Who Exactly Sets Mortgage Interest Rates?
5. Can A Mortgage Broker Unlock My Current Mortgage Interest Rate?