A mortgage broker acts as an intermediary who manages mortgage loans on behalf of individuals or companies. A lender is a financial institution that provides loans directly to you. A broker doesn't lend money. A broker can work with many lenders.
Another term you can find is direct lender. A direct lender simply means a lender who originates its own loans, either with its own funds or with borrowed funds. Therefore, you can be a mortgage banker or a portfolio lender. Therefore, you are not acting as an agent for a wholesale lender.
Direct lenders are inevitably also retail lenders, because they do not involve third parties or intermediaries in lending to consumers. Mortgage specialists at banks and construction companies can also be considered “tied” brokers, insofar as they can only offer products sold by that lender. Mortgage brokers exist to find a bank or direct lender that is willing to grant a specific loan that a person is looking for. Another unethical practice involves inserting hidden clauses in contracts in which a borrower unknowingly agrees to pay the broker or lender to find a mortgage for him, whether the mortgage is closed or not.
In addition, some lenders require accredited brokers to be members of an industry body, such as the Financial Brokers Association of Australia (FBAA) or the Mortgage Finance Association %26 of Australia (MFAA). Those mortgages are generally sold through Fannie Mae and Freddie Mac, allowing those agencies to set minimum underwriting standards for most mortgages issued in the United States. Even large companies with loan licenses sell, or negotiate, the mortgage loan transactions they originate and close. Mortgage brokers can obtain loan approvals from major lenders in the country's secondary wholesale market.
One of the most confusing parts of the mortgage process can be finding out the different types of lenders who deal with mortgage loans and refinancing. Across Canada, high-ratio loans are insured by the Mortgage and Housing Corporation of Canada, Genworth Financial or Canada Guaranty. There are direct lenders, retail lenders, mortgage brokers, portfolio lenders, correspondent lenders, wholesale lenders, and others. While it's ambiguous for mortgage brokers to disclose this, they decide what fees they'll charge upfront, while the direct lender won't know what they're earning overall until the loan is sold.
The largest secondary markets by mortgage volume are the Federal National Mortgage Association and the Federal Mortgage Loan Mortgage Corporation, commonly known as Fannie Mae and Freddie Mac, respectively. Owner-occupier mortgage products, and by extension agents for these products, are regulated by the FCA. Nova Scotia mortgage brokers are licensed by Service Nova Scotia and are regulated by the Mortgage Brokers and Lenders Registration Act. Therefore, mortgage lending depends on the secondary market, which includes the securitization of Wall Street and other large funds.
While many attribute these roles to a mortgage broker, a mortgage broker is generally someone who finds the best mortgage for each customer based on that customer's income, credit, and ownership profiles.
