Mortgage Aggregators Vs Mortgage Wholesalers

Mortgage Aggregators vs Mortgage Wholesalers

by

Herona Kim

Mortgage Aggregators

Mortgage aggregators belong to the secondary mortgage market. They purchase mortgages from various mortgage lending financial institutions and secure such mortgages with mortgage-backed securities (MBS). Mortgage aggregators get their profits by purchasing individual mortgages at much lower prices and selling such mortgages at substantially higher prices. In short, they assemble small products into large packages and sell them to a larger market. They charge appropriately for making this combination and presenting it as a package. Along with mortgage aggregators, dealer groups and franchise groups also act as wholesalers between mortgage brokers and lenders. All of them are termed as mortgage aggregators.

Majority of banks and other lenders have minimum volume requirements along with variance compliance requirements. Most of the average mortgage brokers would find it quite difficult to meet these requirements. Hence, they are forced to work with mortgage aggregators who offer not only easy access to banks and lenders but also provide various types of support that mortgage brokers might need, such as loan comparison software, customer record management, loan lodgment, management support, lending, generation of leads, sales and compliance training, and back office support. However, mortgage aggregators invariably charge a fee for such services, either in the form of retaining a percentage of commission from banks or lenders, a monthly fee, an annual fee, or a fee for each transaction.

Mortgage Wholesalers

Mortgage wholesales utilize average mortgage brokers as individual loan officers. They offer lower rates to the mortgage brokers and the broker would have to add necessary compensation while selling the mortgage loan to the client. This compensation rate would normally be equal to the rate that the client would obtain directly from a mortgage banker but this could vary from one broker to another and from one client to another, depending on the type of mortgage that the client seeks.

Mortgage Brokers

The advantage that mortgage brokers obtain when dealing with mortgage wholesalers is that the wholesaler would be able to repackage a mortgage loan that had been declined by a lender for some reason and present it to another lender. They achieve this by utilizing the concept of white label product, since mortgage managers and lenders have to offer similar products to remain competitive in the mortgage market. Even though minor differences might be present from one lender to another, the principle of white label product forces them to offer mortgage products that do not have much variance. Mortgage wholesalers utilize this to obtain mortgages to individuals in difficulty. Thus, the mortgage wholesalers offer valuable service to mortgage brokers.

Line of Finding

Since individual borrowers would find it difficult to obtain access to large mortgage banks or other mortgage lenders directly, they would be forced to go through a mortgage broker. In turn, the mortgage broker would be dealing either with a mortgage aggregator or with a mortgage wholesaler to reach the right lender. Hence, the line of funding becomes slightly complicated but all the parties involved in mortgage benefit from this kind of line of funding. However, the individual mortgage borrowers and the mortgage brokers might at times land up with greedy mortgage aggregators or mortgage wholesalers, resulting in higher rates for the borrowers and lesser profit for the brokers. Hence, borrowers and brokers should select mortgage aggregators or mortgage wholesalers carefully.

Copyright (c) 2013 Herona Kim

Mortgage Aggregators vs. Mortgage Wholesalers

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