Loan Origination Channels Banks, Mortgage Banks, Brokers We often get questions about the different mortgage origination channels: (1) Commercial Banks; (2) Mortgage Banks; and (3) Brokers.

    The Three Mortgage Origination Channels

    Commercial Banks have dominated the field since the meltdown in 2008 but their share is shrinking. Commercial banks include Wells Fargo, Chase, Citi, U.S. Bank, and B of A. Their advantage is their very low cost of funds – they can access deposits to fund mortgages. Their disadvantages include their bureaucracy and inability to move quickly, and their poor appraisal quality (they usually do not use local appraisal management companies).

    Mortgage Banks have been overtaking Commercial Banks with respect to market share. Mortgage Banks include Quicken, PennyMac, and Prospect at the national level, and RPM, Opes Advisors and Summit Funding at the regional level.

    Mortgage Banks use lines of credit to fund mortgage loans and then quickly sell the loans to investors or third parties to make money (mortgage banks do not hold deposits). Mortgage Banks can typically move much faster than commercial banks because they are less regulated, smaller and more nimble. They can also set up their own appraisal management companies, ensuring access to local appraisers and better appraisal quality.

    JVM Lending switched to the mortgage banking channel in 2014 to take advantage of the speed and appraisal quality.

    Brokers dominated the origination channel prior to 2008, but they now make up only a small portion of the market. They do not underwrite or fund their own loans. Brokers can, however, take advantage of multiple funding sources, and always shop for the lowest rates and most flexible loan programs. Successful local brokers include MPR Financial in Berkeley, and Avenir Mortgage in Pleasant Hill.

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