Mortgage Broker vs. Mortgage Originator

Whats the difference or relationship between mortgage brokers and mortgage originators?

1 Answer

A mortgage originator is a term that is very broad and encompassing of many things. It can refer to a bank that originates mortgage loans, or an individual who works for a mortgage producing entity (either a broker or a bank). In the case of your question I am assuming you are looking for the difference between a mortgage broker and a loan officer at a bank, credit unionĀ orĀ mortgage banker.

The difference in that case is that the mortgage originator or loan officer for a bank, is an employee paid by that bank to originate mortgage loans. They are employed only by that bank, and they are a representative for the source of the funds, in this case a bank directly who is lending the money on the transaction.

A mortgage broker, or a loan officer that works for a mortgage broker is employed by that broker, not a bank. They are not lending money, or representing a company that is lending the money on the transaction. They are an intermediary whose job it is to arrange financing. They work with multiple funding sources, banks, mortgage lenders, private lenders, etc. It is their job to shop a loan package to find funding for it. The source of that funding will vary as opposed to a loan officer for a bank, credit union, etc who will represent his company directly, and only their products and programs.

Compensation for these individuals can vary. Typically in a broker relationship, the broker is paid by the borrower directly, although they may be compensated by the funding source (bank, etc) as well. In the case of going directly to a bank, typically there is not a fee paid directly to the loan officer from the borrower, as they are paid by the bank. On the flip side, a broker typically has access to lower rates, as they do not have to be compensated by the bank, whereas the bank must build some profit into the loan via a slightly higher interest rate, in order to pay the loan officer for originating the loan.