Mortgage Banker

Publication Date :

30 Sep, 2022

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Table Of Contents

What Is A Mortgage Banker?

A mortgage banker is a person, institution, or entity giving borrowers mortgages (house loans). The main role of these bankers is to provide funds to the people intending to buy a house. They use borrowed funds from warehouse lenders or own funds to fund mortgages.

Mortgage bankers act as an advisor to the borrowers. They assist in financial advice to help the applicants to choose from various loan options. In addition, they help the banks in attracting new mortgage customers. They are a major lead that stays with the customer from start to end. However, a certified mortgage banker can charge additional fees for their services.

What Is A Mortgage Banker?

A mortgage banker is a professional providing mortgage to borrowers for real estate purchases. They either use their funds or arrange from the warehouse lenders.
The two processes followed by bankers involve loan origination and loan servicing. The lender stays with the applicant (from loan initiation to loan approval).
Many lenders charge an origination fee ranging from 0.5 to 1%.
They work independently or under a financial institution to provide financing options to applicants.

Mortgage Banker Explained

A mortgage banker allows easy access to providing loans to individuals for purchasing a house. These bankers strive to provide the best loan advice to their clients. They specifically aim at funding real estate loans and mortgages.

The origin of home mortgage bankers dates back to the Greek, Roman, and European civilizations. However, the concept became popular in the United States after World War II. Citizens approached mortgage lenders to buy the property or renovate their houses. But, the debt-to-income ratios had sprung up. Due to this, people had difficulty getting their loans approved. Thus, the Federal government intervened in the mortgage lending and banking industry.

During the Great Depression, three government institutions existed: Home Owners Loan Corporation, the Federal Housing Administration, FDIC (Federal Deposit Insurance Corporation), and the Federal National Mortgage Association. They strived to bring uniformity to the mortgage lending system. As a result, the number of lenders increased substantially in the 21st century. In 2009, the share of mortgage lenders was 9%. According to a Wall Street Journal, the share of independent mortgage lenders reached 68% (almost two-thirds) after that.

In all this, the work of a home mortgage banker remains the same. A lender has to follow two processes - loan origination and loan servicing. Loan origination is a process where a banker needs to arrange loan applications, gather the documents, and get them signed. Next, the mortgage lender helps the borrower with the loan package and associated terms. The next phase is loan servicing. Lenders finance the loan amount through various warehouse lenders. Likewise, they collect the down payment and issue a mortgage to the customer. Also, they ensure to collect timely repayments from the borrower.

How To Be A Mortgage Banker?

Let us look at the steps on how to become a mortgage banker:

Completing A Bachelor's Degree
The first and main step in becoming a certified mortgage banker is to complete a graduate degree. Most people aspiring to become one either complete their Bachelor's degree in banking or accounting. However, selecting a field closer to business administration or finance is a choice.
Take Up A Mortgage Banking Course
To level up their knowledge, aspirants can go for a mortgage banking course. Major universities offer various online courses through e-learning platforms like Udemy and Coursera. It includes a mortgage lender's daily operations and ways to get the license.
Earning License
The next step after completing the course is to earn a mortgage banker license. No lender can issue mortgages without a Mortgage Loan Originator (MLO) license. Although each state has a varying licensing process, the syllabus remains the same. Submit the required documents and meet the required qualifications. However, at the federal level, the applicant must pass the state exam and qualify for at least 75%.
Build A Network
After getting the license, a certified mortgage banker can provide financial advice to their client. Or, they can apply for a job in a leading company to gain better experience and practice their profession.

Examples

Let us look at the mortgage banker examples to comprehend the concept better:

Example #1

Suppose Jannica wants to buy a new property in the outskirts of California. However, she is confused with the various loan options available in the market. So, she approaches John, a mortgage banker. John assists her with the mortgage options available for that property. Also, he assures her about the financing of the loan. Jannica provided the required documents to him, and he proceeded with the application. After some weeks, she gets her home mortgage approved. In exchange, Jannica has to pay an origination fee to the mortgage lender.

Example #2

On August 31, 2022, an executive of a leading mortgage banker, Long Island mortgage, was sentenced to 2 years for $8.9 million fraud. The U.S. District Judge imprisoned Edward E. Bohm, part-owner of Vanguard Funding LLC, for diverting warehouse funds. Vanguard LLC fraudulently obtained these warehouse funds. And in addition to this, Bohm used the repayment money to pay his expenses. Before 2020, the Vanguard chief operating officer, Matthew T. Voss, was also charged with the same charges. In the initial week of August, the Mortgage banker association saw a decline of 2.3%.

Mortgage Banker vs Loan Officer

Although mortgage bankers and loan officers collide in their roles, they differ slightly. While the latter works for the former, the former provides mortgages to the borrowers. The former has a word with the clients; the latter explains the loan options to the applicants. So, both are dependent on each other.

	Mortgage Banker	Loan Officer
Meaning	Mortgage bankers provide mortgages to borrowers.	A person or institution working for a mortgage lender.
Role	To provide mortgages (house loans)	To explain the loan options to the borrower and help in the application process.
Importance	They stay with the customers from start to end.	Here, it is limited to the loan application process.
Fees	Origination fee (0.5 - 1% of loan amount).	Salary plus commission

Frequently Asked Questions (FAQs)

1. How do mortgage bankers get paid?

Mortgage lenders get paid through either fixed salary or origination fee. For example, a mortgage lender who works with a financial institution will receive a monthly salary as compensation. While working independently, they get an origination fee. In other cases, they also get yield spread premiums, discount points, closing costs, and similar things.

2. How much does a mortgage banker make?

As per Indeed, the average pay-off salary of a mortgage lender is $61,262 - $118722 yearly. While in the Mortgage Banker Association, the average salary ranges from $48000 to $155000 per year.

3. Do mortgage bankers need a license?

Yes, a mortgage banker license is necessary for anyone working independently in this field.

4. What is the difference between a mortgage banker and a mortgage broker?

The main difference between mortgage lender and broker is that the latter scatters the best loan options from various lenders and finds the best fit for the borrower.