You probably already know that retail banks are not the only resource for home loans. Many of the U.S. mortgages are being originated through the wholesale channel via efficient, customer oriented and competitive wholesale brokerage firms. Today, after the latest wave of lending industry regulations (SAFE Act, HVCC, MDIA, RESPA 2010, Loan Originator Compensation, Ability to Repay, Qualified Mortgage, etc.) the wholesale channel again emerges as a solid choice for knowledgeable consumers seeking fair treatment and competitive loan terms. Here are some of the reasons why.
Wholesale channel employs only licensed loan originators who have passed vigorous national and state written exams. Loan originators working for retail banks are “registered”, but not licensed, and are therefore not held to the same standards. They have not taken the national and state loan originator exams. You will find that wholesale loan originators tend to know more about lending and consumer protection laws than their retail bank counterparts as a result.
By replacing the retail bank’s branch with cost cautious, high efficiency independent office your wholesale originator eliminates good amount of bureaucracy and overhead often associated with retail banks, and reduces the cost of your transaction. The number of people involved in your transaction is basically cut to two – the originator and the underwriter, who knows the originator by name and answers the phone any time the originator calls.
Loan originators working for wholesale mortgage brokerage firms have complete access to all underwriting guidelines and underwriting engines. They are more in control and are better armed to provide accurate answers to broader spectrum of questions. It is their job to know everything there is to know about mortgage lending, and to use this knowledge to put you into the best loan available for your specific case.
Unlike retail banks which run on heavy advertisement, smaller wholesale mortgage companies run mostly on referrals. One can only earn a referral by meeting and exceeding client's expectations. Time and time again, this is exactly what we do. Click here to see for yourself.
The wholesale originator has a choice of where to take his business and will work only with best performing wholesale lenders and investors who are well positioned to approve the file and deliver best price execution for the client. Because every funding investor has its own sweet spot, the place to obtain the best pricing will vary from case to case, and your wholesale originator knows how and where to obtain it.
Correspondent lenders (which also like to call themselves "direct" lenders) borrow temporary warehouse line funds to close loans in their name, and then quickly sell them to the funding lender/investor. Loans are priced based on the funding lender's rate sheets and are underwritten to the funding lender's guidelines. The funding lender/investor compensates the correspondent lender for the originated loan in the form of service release premium. Unlike wholesale brokers, correspondent (or "direct") lenders do not disclose this compensation to consumers. Otherwise, essentially the same function and the same service is performed. Correspondent lenders often hold a combined lender and broker license (type MC in Massachusetts).