Mortgage Originator

What is a 'Mortgage Originator'

A mortgage originator is an institution or individual that works with a borrower to complete a mortgage transaction. It can be either a mortgage broker or a mortgage banker, and is the original mortgage lender. Mortgage originators are part of the primary mortgage market and must work with underwriters and loan processors from the application date until closing to gather necessary documentation and guide the file through the approval process.

BREAKING DOWN 'Mortgage Originator'

Tallying up what percentage of originations belong to which mortgage originator depends on how an origination is counted. A large percentage of newly originated mortgages are immediately sold into the secondary mortgage market, where they might be counted by the institution that purchases the mortgage in the secondary market as an origination, thus double-counting the origination.

Primary vs. Secondary Mortgage Market

The primary mortgage market is the initial marketplace where the borrower gets together with the mortgage originator, whether a bank, credit union or mortgage broker, to conduct a mortgage transaction. At the closing table, the primary mortgage lender provides the funds to the borrower, which the borrower uses to complete his home purchase.

The primary mortgage market is highly fragmented in the United States. While there are several large firms that originate a large percentage of mortgages, there are thousands of smaller firms and individuals that also account for a large percentage of total mortgage originations.

Once originated, the servicing rights to mortgages frequently get sold from one institution to another. This activity takes place on the secondary mortgage market, termed as such because buying and selling in this marketplace can only occur after a mortgage is already in force. Government-sponsored enterprises (GSEs) such as Fannie Mae and Freddie Mac represent some of the largest buyers on the secondary market. Secondary buyers often package pools of loans into mortgage-backed securities (MBS) and sell them, frequently to investment banks on Wall Street.

Mortgage Originator Differences

Mortgage bankers and mortgage brokers represent two of the most common types of mortgage originators. While the titles sound similar, important distinctions exist between the two. A mortgage banker works for a lending institution that actually funds loans at closing with its own money. Most retail banks and credit unions employ mortgage bankers. A mortgage broker, by contrast, serves as a middleman between the borrower and various mortgage banking institutions. The broker takes the application, checks credit and income, and often handles much of the underwriting and processing but ultimately ferrets the loan out to a lending institution to fund it at closing.

RELATED TERMS
  1. Secondary Mortgage Market

    The market where mortgage loans and servicing rights are bought ...
  2. Mortgage Company

    A company engaged in the business of originating and/or funding ...
  3. Best Efforts Mortgage Lock

    When the sale of a mortgage in the secondary mortgage market ...
  4. Second Mortgage

    A type of subordinate mortgage made while an original mortgage ...
  5. No-Cost Mortgage

    A mortgage refinancing situation in which the lender pays the ...
  6. Mortgage Rate

    The rate of interest charged on a mortgage. Mortgage rates are ...
Related Articles
  1. Personal Finance

    Behind the Scenes of Your Mortgage

    Four major players slice and dice your mortgage in the secondary market.
  2. Personal Finance

    Shopping for a mortgage in 2016? Use this tool first.

    As home-buying technology has progressed, the process of finding the best mortgages rates for 2016 can all be done online.
  3. Personal Finance

    Shopping for a mortgage in 2016? Use this tool first.

    As home-buying technology has progressed, the process of finding the best mortgages rates for 2016 can all be done online.
  4. Retirement

    Additional Streams of Income for Seniors

    Find out how a reverse mortgage can work in your favor during retirement.
  5. Personal Finance

    Mortgage Broker vs. Direct Lenders: Which is Best?

    There are key differences between mortgage brokers and direct lenders. Here's how to choose which is best for you.
  6. Financial Advisor

    Reverse Mortgages: Right for Clients? Not Often

    Reverse mortgages are a legitimate vehicle for folks age 62 and up to tap into the equity in their homes for other uses. Here's what to consider with them.
  7. Personal Finance

    What The New Mortgage Lending Rules Really Mean

    Every mortgage rule change has consequences for borrowers, lenders, the housing market and the broader economy.
  8. Personal Finance

    7 Mortgage Trends To Expect In 2011

    How will the year compare to 2010? What's likely to be different?
  9. Personal Finance

    5 Reasons To Save For A Big Mortgage Down Payment

    You may be anxious to buy a home, but taking time to save a large down payment has numerous advantages.
  10. Investing

    Score a Cheap Mortgage

    Hidden costs can create what looks like a good deal. Find out how to find the best mortgage possible.
RELATED FAQS
  1. If my mortgage lender goes bankrupt, do I still have to pay my mortgage?

    Yes, if your mortgage lender goes bankrupt you do still need to pay your mortgage obligation. Sorry to disappoint, but there ... Read Answer >>
  2. What is an assumable mortgage?

    The purchase of a home is a very expensive undertaking and usually requires some form of financing to make the purchase possible. ... Read Answer >>
  3. What are the pros and cons of a simple-interest mortgage?

    Learn the difference between a simple interest mortgage and a standard mortgage, along with their relative advantages and ... Read Answer >>
  4. What are the different types of subprime mortgages?

    Clarify your understanding of subprime mortgages. Learn about the different types, how they work and when they might be beneficial. Read Answer >>
  5. How does the loan-to-value ratio affect my mortgage payments?

    Understand what the loan to value ratio is, how the ratio is calculated and learn how it has an impact on your mortgage payments ... Read Answer >>
  6. What are the requirements to apply for a reverse mortgage loan?

    For homeowners of a certain age who wish to stay in their homes but are finding it costly, a reverse mortgage could be the ... Read Answer >>
Trading Center