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Real Estate & Finance News That Affects Your Home                                                         Page  1 2 3 4

July 2009 - Page 4

MORTGAGES Getting To Know Your Lender A number of different types of companies offer home mortgage loans. Here is a brief summary of how they operate: Mortgage bankers are direct lenders, who use their own funds to originate loans, then often quickly sell the loans on the secondary mortgage market. They may or may not continue to service the loans (sending bills, statements, etc.) after selling them. Typically, the loans they provide meet guidelines established by Fannie Mae and Freddie Mac or other government programs that secure loans, so the loans can be easily sold in the secondary mortgage market. Portfolio lenders are also direct lenders, using their own funds to make loans. Rather than selling their loans, they typically keep them as investments -- at least for a period of time. Because resale isn't the goal, portfolio lenders are not as bound by Fannie Mae/Freddie Mac guidelines. Some institutions, such as banks, savings and loans or credit unions, may operate both as mortgage bankers and portfolio lenders. Mortgage brokers work with a number of lenders, and therefore can offer a wide variety of loan programs. Serving as an intermediary between lenders and borrowers, the mortgage broker will help the borrower select a loan program, then will look for a lender to fund the loan. The broker works with the borrower to complete a loan application, collect required documentation, order a credit report, arrange to have the property appraised, etc. Payment for the broker is factored into the cost of the loan, usually as fees or points in closing/settlement costs. Correspondent mortgage brokers act as agents for a single lender (but sometimes several) from originating loans through settlement/closing. The loans are made in the correspondent's name even though the lender supplies the funds, usually underwrites the loan and owns the loan after closing/settlement. The correspondent may also become the servicer for the lender. Correspondents often are paid from the loan origination fee charged to the borrower.                                                                                                                                                                                                                                                        Page  1 2 3 4