DEFINITION of 'Third-Party Mortgage Originator'

1. A person or company involved in the process of marketing mortgages and gathering borrower information for a mortgage application. This information is then transferred or sold to the actual mortgage lender. Mortgage brokers are third-party originators.

2. A person or company that is involved in any aspect of the mortgage origination process (underwriting, closing, funding, etc.) on behalf of the actual mortgage lender.

BREAKING DOWN 'Third-Party Mortgage Originator'

Third party mortgage originations frequently come under scrutiny because of third-party originator's lack of an ongoing and lasting responsibility for the mortgage. For example, once a mortgage broker has been compensated for brokering a mortgage, it no longer has any responsibility for the performance of the mortgage, whereas the lender has a continuing interest and is subject to some recourse should the mortgage default. This has lead to some criticism of third-party originators for overpricing or otherwise selling loans to borrowers that they can't afford.

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