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Mortgage Bankers and Mortgage Brokers

A Mortgage Banker is a large lender that creates groups of loans which they sell directly to FNMA - Federal National Mortgage Association (Fannie Mae), FHLMC - Federal Home Loan Mortgage Corporation (Freddie Mac) and GNMA - Government National Mortgage Association (Ginnie Mae). A company that does this is called a mortgage banker.

Some of these companies organize or "service" the loans they sell, ie they themselves manage the loan and the repayments from the homeowner. However many do not. Two of the largest are Countrywide Home Loans and Wells Fargo.

A Mortgage Broker is a company that originate loans, then broker them to wholesale lending institutions. Mortgage brokers deal with lending institutions that have a wholesale loan department, who fund the loan.

The Wholesale Lenders, many of whom rely solely on mortgage brokers for their loans, fund the loans. If a borrower goes to a retail branch of the wholesale lender (most have a retail division) the cost will be approximately the same as if the borrower had gone to a mortgage broker. This is because the broker obtains a cheaper deal, but adds his fee also.