A Mortgage Bank is just one type of company you can use to get a mortgage. Some people hear the word bank and automatically think bigger and safer so they would pick a bank over a broker for their mortgage.

Mortgage Bank Definition

A mortgage bank is a retail mortgage originator that sells loans directly to the public and funds those loans with their own money. Unlike a mortgage broker who also sells loans directly to the public but must use the funds of a wholesale lender to close, a mortgage bank uses its own money for closing.

A mortgage bank does not have to disclose the money they make from increasing the rate (called service release premium or SRP) because they use their own money. A mortgage broker (Click To See Definition - Mortgage Broker) does have to disclose this amount called yield spread premium or YSP.

A mortgage bank will very quickly bundle up your loan along with other similar ones and sell them to the secondary market. They get paid the extra from your higher rate when they sell. That is why at closing you won’t know how much they made from your higher rate because they don’t actually make it until about 30 days later when they sell your loan.

The difference between a mortgage broker and a mortgage banker is this.

A broker has access to different mortgage products and has to disclose the profit when they increase your rate at closing on the closing statement.

A bank has their own mortgage products and does not have to disclose the profit they make on increasing your rate.

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