Word of the Day - Mortgage Banker

A person, corporation, or firm not otherwise in banking and finance that normally provides its own funds for mortgage financing as opposed to savings and loan associations or commercial banks that use other people’s money—namely that of their depositors—to originate mort¬gage loans. Although some mortgage bankers do supply permanent long-term financing, the majority specialize in supplying short-term and interim financing, either through their own resources or by borrowing from commercial sources. It is said that what a mortgage banker lends, it must sell.

The activities of mortgage bankers have been greatly expanded due to the development of the mortgage correspondent system. Under this system, a mortgage banker or mortgage banking company seeks to originate numerous loan transactions and then sell these mortgages at a discount to large investors, such as insurance companies, commercial banks, and retirement and pension funds. Mortgage bankers are a major source of construction loans and are very active in lending money on commercial real estate such as shopping centers and office buildings.

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