Friday, June 26, 2009

Nondepository lenders in the primary market

The depository lenders discussed in the previous section historically dominated the home mortgage origination business before the 1980s.Using savings deposits; these institutions funded loan-term home mortgage loans and then held the whole loans as investment. That is, they were portfolio lenders. However, as financial institutions in the United States suffered trough the 1980s and early 1990s, mortgage companies emerged as the central element for a new System of home mortgage originations. Mortgage companies have accounted for over 50 percent of all conventional home mortgage originations since 1993. Their share of the FHA\VA originations market (discussed below) is even larger-exceeding 80 percent.
Mortgage companies vary widely in the scope of their activities. Mortgage bankers are full-service mortgage companies: they process, close, provide funding, and sell the loans they originate in the secondary mortgage market. They also typically service the loans they sold. However, some mortgage companies specialize in the details of loan origination. These firms are referred to as mortgage brokers, Brokers do not provide the funding for the loan, nor do they typically service the loan after selling them. Instead, they serve strictly as an intermediary between those who demand mortgage funds and those who supply the funds

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