Mortgage Bankers not only originate loans but package portfolios of loans that they then sell to large loan backers such as Freddie Mae (Federal Home Loan Mortgage Association), Fannie Mae (Federal National Mortgage Association), Ginnie Mae (Government National Mortgage Association), investors favoring jumbo loans and other investors.

These aforementioned businesses may also service some of the loans that they make. Mortgage bankers vary in size but, by definition, any institution that originates and sells packages of loans to institutions such as Freddie Mae, Fannie Mae and Ginnie Mae are deemed mortgage bankers. Countrywide Home Loan and Wells Fargo Bank are the two largest mortgage bankers around today. While Wells Fargo is associated with a bank and Countrywide is not, based on the volume and scope of their respective businesses, they both retain the right to classified as mortgage bankers.

On the other hand, mortgage brokers originate loans but do not service them. As brokers, they maintain business relationships with the wholesale lending arms of a number of lending institutions. They then sell or “broker” the loans that they originate to these wholesale lenders who handle the underwriting and funding of the loans.

Mortgage brokers also have established business relationships with the wholesale lending arms of mortgage bankers and portfolio lenders. In fact, they frequently function as the loan originators for these organizations who sometimes strategically choose not to invest many human resources in this function.

Mortgage bankers, in fact, offer their services to mortgage brokers at a cheaper rate than they offer their own retail departments. The result for the consumer is that they can obtain roughly the same loan rates utilizing any of the three most common lending channels.