Wholesale lenders provide the money at closing for your mortgage. They also underwrite the mortgage and make sure it has all the required documents and is within the guidelines.

Wholesale Lenders Definition

A wholesale lender is in between the originator and the final investor. They produce a wholesale rate sheet for retail originators to price from. Wholesale lending is a part of every mortgage even if you use banks or big national mortgage lenders. You will never be able to go straight to the wholesale source. You start with a retail broker or a retail division of one of the national mortgage lenders.

Most often the term wholesale mortgage lender is used then talking about a mortgage originated by a broker. Brokers and the wholesale lenders they use are not affiliated with each other…they are two different companies. Big national mortgage lenders have their own wholesale lending division along with the retail one.

A wholesale lender makes money by charging fees like an underwriting fee or admin fee and by making a spread off the rate when they sell the loan to the final investor. Some other fees you may see are, tax service fee, document preparation, wire fee, etc.

The rate sheets they produce have their profit built in. When the bundles of mortgages are sold, the final investor pays them the spread on the rate called service release premium.

Wholesale lenders also protect you from predatory lending practices. They don’t want to get their certification pulled by allowing a broker or lender to practice predatory lending. It is most seen with mortgage broker lending. The wholesale lenders put rules in place for how many fees brokers can collect, they disclose their yield spread premium, and they redisclose to you in addition to the disclosures you get from the mortgage broker.

There are different relationships a broker can have with a wholesale lender. Correspondent lenders have a relationship with the wholesale lender that is more like bank or big national mortgage lenders. They do not have to disclose the yield spread premium like a regular broker relationship would.


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