What is a Mortgage Originator?
A mortgage originator is a person or institution that works with clients and helps them with the completion of a mortgage loan transaction. The mortgage originator is the primary lender and can act as a mortgage banker or broker.
Originators fall under the primary mortgage market division and collaborate with loan processors and underwriters throughout the entire process from start to approval status, and handle the collection of relevant documentation.
An originator generates revenue through origination fees and variations in the interest rates given to a borrower and what can be obtained on the secondary market through the sale of the mortgage.
- A mortgage originator is a person or institution that works with clients and aids them with the completion of a mortgage transaction.
- The most popular types of mortgage originators are mortgage brokers and mortgage bankers.
- The creation of a mortgage is primarily carried out by a mortgage originator. They can be a mortgage broker, a mortgage bank, or even a retail bank.
Example – Working with a Mortgage Originator
A mortgage borrower or applicant connects with a mortgage originator, who then educates themselves on the financial circumstances of the potential borrower by asking questions about the client’s house purchasing needs.
Similar to a mortgage broker, the mortgage originator compiles the documents required for the application process from the client and submits the documentation. The originator tracks the process regularly to keep the client informed of the status of the application.
The mortgage originator also assists the client with any issues that may arise due to the potentially negative credit history of the client or other reports that can impact the approval of the mortgage application.
Types of Mortgage Originators
The most popular types of mortgage originators are mortgage brokers and mortgage bankers. They can be easily mistaken for one another.
1. Mortgage broker
A mortgage broker can be defined as a middleman who manages the process of applying for a mortgage loan for businesses or people. Basically, they connect mortgage lenders and borrowers without making use of their own funds to establish the connection.
Mortgage brokers educate themselves on the financial standing of the borrower and attempt to connect them with a lender who provides a good interest rate for the borrower and is a good fit. They also collect relevant documentation from the borrower and pass it to the potential lender for processing and/or approval.
2. Mortgage banker
In contrast, a mortgage banker can be defined as an individual who is employed by a lending agency or institution, credit union, or bank that carries out mortgages with their own funds.
Risks Associated with Originators Who Aggregate Mortgages
Interest rates are an important factor in terms of market premiums or discounts when dealing with mortgage sales on the secondary market.
Interest rates can fluctuate from the quoted rate that has been locked in by the mortgage borrower. The interest rate fluctuation can impact the value of the mortgage and alter the returns that the originator can derive on the mortgage.
It is the risk that is associated with holding onto the mortgage and not selling it immediately after the borrower’s locked in a rate. As a form of risk mitigation from interest rate fluctuations, originators who do such things can hedge their mortgages.
Duties of Mortgage Originators
Mortgage originators develop relationships with individuals in the real estate industry, such as agents or building contractors, with the objective of fostering and attracting future loan applicants.
Depending on the originator’s employer, they may need to perform cold calls as a form of telesales. To compile what is known as a “loan package,” the originator collects the documentation needed from a client for the mortgage application process, reviews the documentation, and processes the application before moving on to the next steps.
Information requested from the potential borrower includes proof of income and employment, bank statements, credit reports, etc.
On top of these duties, a mortgage originator administers the loan application process and estimates the rates and pricing related to the mortgage. They always keep themselves well-informed on the loan products and processes of a company and ensure they maintain a good communication channel with their clients.
CFI offers the Certified Banking & Credit Analyst (CBCA)™ certification program for those looking to take their careers to the next level. To keep learning and developing your knowledge base, please explore the additional relevant resources below: