Knowing the differences between a Broker, Banker and Correspondent Lender…

You will hear the following terms when shopping for a mortgage. I have been asked about these terms a thousand times since I transferred companies recently. Those terms are broker, mortgage banker, and correspondent lender. Knowing the differences gives you a variety of options in the marketplace. I mentioned in a previous blog that choosing your lender comes down to the relationship that you build with the loan consultant. Just because I believe this to be true doesn’t mean that your need is the same.

Broker is an individual in the business of assisting in arranging funding or negotiating contracts for the client but who doesn’t loan the money himself.


Brokers to me are a lot like a basketball scout. They are either charged a fee or receive commissions for matching the team to the player. These fees are required to be disclosed. They have plenty of flexibility to shop around for the lowest rate but the fees might be higher. They are freelance agents and not employees of the companies. Many of services you see advertised online are brokers. Which is one of the reasons that this industry makes up around 50% of the lending world today.

Mortgage Banker is an organization that makes real estate loans that are then resold to investors. The mortgage banker's income derives from the fees it charges to originate and service the mortgages. Sale of the mortgages gives the mortgage banker more funds to use in making additional loans

These Banks are state licensed, have lines of credit to fund loans and their own employees. These employees are given rates sheets each day to show the cost of loans. Employees have little room to negotiate since they have to have money to keep the doors open. They still offer competitive rates and a wide variety of products. The difference is that all of those products come from the same institution. The perk is that you know the institution that is making the decision and can offer you outstanding customer service after closing.

Correspondent Lender is a lender who delivers loans to another (usually larger) lender against prior price commitments the larger lender has made to the correspondent.

These lenders have the option to hold your loan in their own portfolio or sell it to the secondary market. To me this offers you the best of both worlds. You deal with the actual decision maker for loans within their portfolio. You would deal with the same loan associate no matter the direction your loan needs to go. It is usually sold 2-3 weeks after closing since they typically have a smaller line of credit. They are usually sold to the larger lender (sponsor) in large lumps instead of one by one. The sponsor acts like the mortgage banker.

I am currently employed with Prospect Mortgage who is one of the largest correspondent lenders in the country. They state that the “business model was formed during the challenging market, so know what it takes to survive and meet customer needs during these tough times.” This business model has made them be able to service around 70 percent of the loans. http://www.myprospectmortgage.com/company_profile.asp

Knowing the differences between a Broker, Banker and Correspondent Lender…