Where do loans come from?
The act of providing a loan to a borrower is origination. Before origination can even begin, the lender must obtain an initial application for a mortgage. There are 3 methods by which a lender obtains a loan application.
When a lender directly advertises or solicits potential borrowers for a loan, this is referred to as retail lending. The lender works directly with the borrower to complete the origination process and provides the financing directly to the borrower.
Alternatively, a lender may team up with independent partners who seek out clients on their own, then turn around and send the loan application to the lender. These mortgage brokers work directly with the borrowers on behalf of the lender, but financing is still provided directly from the lender to the borrower. This methodology is called wholesale lending.
Finally, a lender may purchase loans where a smaller lender or mortgage broker, in these cases referred to as a mortgage banker, has worked directly with the borrower to complete the loan process and has provided the funds to finance the loan. The acquisition of loans originated and funded by another party is referred to as correspondent lending.
