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The Curious Bag
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A mortgage bank is a bank that specializes in originating mortgage loans to consumers by backing the funds for a loan. After the loan is originated, often it is sold to another investing source.
Identification
Mortgage banks are sometimes confused with mortgage brokers, who sell mortgages on behalf of businesses or middlemen, but don't back their own loans.
Function
After providing a line of credit to a borrower, a mortgage bank usually sells the loan to another investor to recoup the money for the loan, which enables these banks to provide a mortgage to the next consumer.
Size
Mortgage banks vary in size. Some mortgage banks are able to serve customers nationwide, while others are much smaller, but all must be licensed by each state they do business in.
Significance
Mortgage banks began to grow beginning in the 1980s. From 1980 to the early 1990s mortgage banks increased their share of all single-family loans from the entire mortgage market from 20 percent to more than 40 percent.
Considerations
Although a mortgage bank must be licensed in each state it does business in, it is not characterized as a federal or state bank and does not accept deposits as other banks do.
Source:
Comptroller of the Currency: Mortgage Banking
Lend New York.com: New York Mortgage Bankers
Yahoo Finance: Mortgage Brokers: Friend or Foe
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