Mortgage Originators Initiate The Process
Your mortgage lender is part of an extensive and wealthy system of residential real estate finance. The person at the very knife-edge of the lending process is the loan originator, the loan officer or independent arranger who helps loan applicants fill out forms, gather documents and submit the loan application; they are there to help you. Applying for a home loan is uniquely stressful, and surprises can pop up, even after you begin making payments.
However, the mortgage originator is also responsible to the lender, and they have to balance the conflicting responsibilities of being the person in the middle. The range of organizations that offer residential mortgages to consumers is diverse; banks, credit unions, and finance companies to name just a few, but, the function of the loan officer who directly facilitates the process of setting up home loans is a constant.
Back Office Issues And Secondary Action
The first factor is that there are many regulations involved in mortgage lending, which includes requirements for loan originator licensing under the 2008 SAFE Act, a Federal statute that dictates that all originators must hold either Federal or state issued licenses. Also, the practices that work well in one instance tend to apply to the whole market; consumer behavior determines lending officer behavior to a large extent.
In all likelihood, the next thing that happens to your loan once you have begun the term, your lender will sell it on the secondary mortgage market. As a borrower in good standing, this means little to you directly. However, it sends the loan into a system that spreads the risk among many investors and gives liquidity back to the mortgage companies, so they can keep funding new loans.
Your loan officer or independent originator hands off the mortgage to the company that funds it, the funder may hold it and service it in-house or, when it is an FHA conforming loan, sell it to Fannie Mae or Freddie Mac to bundle into mortgage-backed securities (MBSs).
Mortgage companies routinely sell home loans on the secondary market for real estate loans. The transfer does not impact borrowers directly. However, the servicer will stake a fraction of a percent as a fee to send the payments to the MBS holders.
Sending Home Loans Down The Pipeline And Servicing Them
The organization that takes your payments and passes them to the MBSs is your mortgage servicer, which may be the same company that initially underwrote your loan, or it may not. Do not be surprised if, not long after you have bought a new home or refinanced, your lender sends you a formal letter of notification of a new servicer.
It is a common practice for lenders to sell to your loan on the secondary market. They may also introduce another financial company that will service your loan by taking your payments. As surprising as this is to unsuspecting consumers, you need not worry, it is all business as usual and part of the structure of the financial industry that forms the foundation of America’s dreams of homeownership.