What is Wholesale Lending?

  • October 27, 2014

What is wholesale lending and how does it differentiate from other types of mortgage lending? Let’s sort through the confusion and explore wholesale lending today.
 
Wholesale lending defines the process of a lender providing the credit decision as well as the funding of a mortgage loan that was originated by a mortgage broker. Wholesale lenders have the underwriting authority and funds available to lend while mortgage brokers typically have a deeper presence in the marketplace than banks do and access to more loan product options.
 
Generally, mortgage brokers enter into an agreement with a wholesale lender before they begin originating loans on the lender’s behalf. The lender is responsible for supporting the broker’s relationships with mortgage loan applicants and operating within current industry restrictions and guidelines. Wholesale lenders charge fees such as underwriting and admin fees, to cover the costs associated with this service.
 
A broker establishes the origination of a loan and takes the application from the perspective borrower. Mortgage Brokerages are independent businesses and typically work with multiple wholesale lenders to help fulfill their customer’s borrowing needs.
 
When a homeowner or homebuyer chooses to work with a mortgage broker, they will work with that person and their staff through the entire loan process and not directly with a wholesale lender. Their broker will assess their options with multiple lenders in the industry and presents them with the solution best suited for their needs.

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