Legal Definitions - mortgage banker

A mortgage banker is a financial institution or individual that directly provides loans to people who want to buy or refinance real estate, typically homes. They make money by charging fees for creating these loans. After issuing a loan, a mortgage banker often sells it to another financial entity, such as a larger bank or an investment firm. However, even after selling the loan, the mortgage banker frequently continues to manage the loan by collecting the monthly payments from the borrower and handling other administrative tasks on behalf of the new owner of the loan.

Here are some examples to illustrate the role of a mortgage banker:

• Example 1: First-Time Home Purchase

  Sarah and Tom are purchasing their first home. They apply for a mortgage through "Green Valley Funding," a mortgage banker. Green Valley Funding reviews their application, approves the loan, and provides the funds for their home purchase, charging an origination fee for their services. A few weeks after the closing, Green Valley Funding sells Sarah and Tom's mortgage to a large national bank. Despite the sale, Sarah and Tom continue to send their monthly mortgage payments directly to Green Valley Funding, which handles all the payment processing and customer service on behalf of the national bank.

  This illustrates the term because Green Valley Funding originated the loan, charged a fee, then resold it to another party (the national bank), but continued to service the monthly payments.

• Example 2: Refinancing an Existing Mortgage

  Maria wants to refinance her existing home loan to take advantage of lower interest rates. She contacts "Prime Lending Solutions," a mortgage banker. Prime Lending Solutions processes her new loan application, closes the loan, and provides the funds to pay off her old mortgage. They charge a fee for this refinancing service. Shortly after, Prime Lending Solutions bundles Maria's new mortgage with many others and sells them to a pension fund seeking long-term investments. Nevertheless, Prime Lending Solutions remains Maria's point of contact for her mortgage, sending her statements and collecting her monthly payments.

  This demonstrates the role of a mortgage banker as Prime Lending Solutions originated the refinancing loan, earned a fee, resold it to the pension fund, and continues to service the monthly payments.