HOW THE MORTGAGE MARKET WORKS
Home mortgage lending is a Federally regulated business. All primary lenders, Banks, Credit Unions, Mortgage Bankers and Mortgage Brokers make the same mortgages. These are Conforming loans, loans that conform to the Fanny May and Freddie Mack guidelines. FHA loans that have a guarantee from the department of Housing, VA loans that have a guarantee from the department of veterans affairs. Non QM mortgages that conform to different guidelines but are all very similar.
All mortgages are negotiated between a borrower and a Mortgage Loan Originator who is a licensed by the NMLS and by the State and is a natural person. All MLOs are employees of and sponsored by a licensed primary lender. The MLO negotiates the mortgage and the primary lender funds the loan. All loans are sold into the secondary mortgage market. They must conform to the requirements of the various agencies. Your lawyer or realtor can not make any changes in a mortgage. The mortgage form is set by the agency.
The secondary mortgage market is dominated by Fanny Mae and Freddie Mack. Other participants include the Department of Housing (FHA), Veterans Administration (VA), the Department of Agriculture (USDA), wholesale mortgage bankers, a few large active banks and investors. The Federal Reserve bank is active in the secondary mortgage market and influences interest rates.
All primary lenders makes the same loans. Over 60% of all loans are conforming loans, followed by FHA loans, VA loans, USDA loans and non conforming loans. All loans are underwritten in accordance with agency guidelines. 90% of loans are underwritten automatically with a program called desk top underwriting. Some loans are manually underwritten to agency guidelines.
Primary lenders have two ways to make money. First is from the sale of mortgages in the secondary market. Second is to charge fees to the borrowers. Most banks buy their funds from wholesalers as do mortgage brokers and smaller mortgage bankers. Effectively all lenders have the same cost of funds. Big company have big overhead. Small company have small overhead and lower costs. First Charter Financial Corporation is a small low overhead Arizona company. We do not charge high fees for our loans. This is an advantage for you, the borrower. Call us or start a loan. (480) 970-0990.
