Mortgage Banker vs. Mortgage Broker – What's the Difference?
February 13, 2025
We discuss the differences between various mortgage origination channels from both a mortgage borrower's and an MBS trader's perspective. Many mortgage literature sources state, "From the borrower's point of view, there's not much difference between a mortgage broker and a mortgage banker – a lender is a lender". But is that really true when we look at the data?
Mortgage Borrower Perspective
Typically, this is a standard description: See link.
But let's analyze the data:
Figures 1, 2, and 3 below show that while loan rates between bankers and broker originations are similar, brokers tend to originate loans with lower credit scores and higher loan amounts. Therefore, for these borrowers, working with a broker may be a better match.
MBS Trader Perspective
Looking at Figure 4, broker or correspondent-originated loans tend to have faster prepayments when in-the-money and slower prepayments when out-of-the-money. In other words, broker and correspondent prepayments are more efficient. Therefore, if an MBS trader wants to improve the convexity of their portfolio, purchasing bonds backed by banker/retail-originated loans may be more beneficial.
The analysis above is multi-dimensional and only scratches the surface. If you are interested in similar analyses based on other factors—such as servicer, geography, loan purpose, or other loan, borrower, and property characteristics—please let us know, and we will be happy to share them with you.
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