It used to be that mortgages came from a Savings and Loan, but that changed in the late 1980s when the Savings and Loan crisis hit and the federal government was charged with buying out failed Savings and Loans. Later, mortgage banks began

issuing mortgages, filling the void left by the defunct Savings and Loan companies. Soon thereafter, mortgage brokers became more prevalent. Nowadays, you can get a mortgage from your bank down the street, your credit union, a mortgage banker, a mortgage broker, a correspondent lender, or an online lender. How do you decide which is best for you?

Retail Bank

A retail bank is where you keep your checking or savings account. It's right down the street and offers everything from credit cards to student loans to, that's right, your mortgage.

Your retail bank may not have the absolute lowest interest rate, but it may offer incentives such as waiving various bank fees or giving you a free safety deposit box.

Credit Union

A credit union is similar to a bank: It offers mostly the same products and services as a retail bank, but it's open only to members. A university may have its own credit union, for example. Or one may be open to those who live in a certain area or who are employed at the same company.

Credit unions will rarely make a mortgage loan directly. Instead, they will act as mortgage brokers or they will contract with a third-party lender to place mortgage loans for them. Credit union mortgage rates are typically very competitive, just as they are with other types of consumer loans.

Mortgage Banker

Mortgage bankers do one thing and one thing only; they issue mortgage loans. A mortgage banker does not issue credit cards or other consumer credit services.

Theoretically, with this singular focus, the mortgage banker can be more competitive and more efficient than a retail bank with its multiple profit centers, products, and services.

When a mortgage banker places a mortgage loan, it typically has a credit line established somewhere to fund the mortgage being placed. If you have a $250,000 mortgage, the mortgage banker will either open up its cash vault or transfer $250,000 from its credit line to the seller of the property.

Mortgage bankers can keep your loan or sell it. When they keep your loan, you will send them your monthly mortgage payments. Collecting monthly mortgage payments is called “servicing.”

When a mortgage banker sells your mortgage, nothing changes with the mortgage itself. You'll be sending your monthly payment to a new mortgage company that will service your loan.

Most lenders buy and sell mortgages all the time. It is rare for a mortgage lender never to sell a mortgage. But there is a federal law that requires lenders to tell you what percent of loans they have sold in the past. You'll find that information on the Servicing Disclosure form. There will be different boxes that say;

“Last year we sold □ 0-25%, □ 26-50%, □ 51-75%, □ 76-100% of our loans.”

And one of those boxes should be checked.

Before buying and selling loans in the secondary market became more common in the 1990s, borrowers were not used to their loan being sold — and some took it personally. I recall a mortgage that I got from a mortgage bank that later sold it to my very own bank. I suddenly received a lot of freebies because I had a credit card, checking and savings accounts, and now a mortgage at the same bank.

My bank kept my mortgage for about a year, then sold it to someone else.

Mortgage bankers take the mortgage from cradle to grave. In other words, you will apply directly with them, and your loan will be processed and approved by the lender, who will supply the funds at the closing table.

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