Mortgage Banker: What It Is and How It Works

Key takeaways

• A mortgage banker is a company, individual, or institution that originates mortgages using its own funds or borrowed funds.
• Mortgage bankers typically earn fees from loan originations and are usually employed by a financial institution.
• They can approve or deny mortgage applications on behalf of their institution and may also advise borrowers on loan options.
• Mortgage bankers differ from mortgage brokers because bankers close loans in their own name and fund them directly; brokers act as intermediaries who shop lenders on behalf of borrowers.

What is a mortgage banker?

A mortgage banker originates home loans and funds them either with the institution’s own capital or with short-term financing from a warehouse lender. After funding a loan, the mortgage banker may:
* keep the loan in its portfolio,
* sell the loan to an investor, or
* sell the servicing rights to another institution.

The core business is generating fees from loan originations and related services.

Where mortgage bankers work and how they operate

Mortgage bankers commonly work in the lending or loan department of:
* banks
* credit unions
* savings and loan associations
* independent mortgage banking firms

Because they represent a specific institution, mortgage bankers can only offer that institution’s loan products. They evaluate property value, collect borrower financial information, underwrite or recommend decisions, and arrange funding. Larger mortgage banking firms may retain servicing of loans; smaller firms more often sell servicing rights.

Mortgage banker vs. mortgage broker

Mortgage banker
* Closes and funds loans in its own name.
* Uses its own or borrowed funds to originate mortgages.
* Employed by a lending institution and generally paid a salary (sometimes with bonuses).

Mortgage broker
* Acts as an intermediary between borrower and lender.
* Does not fund loans; instead shops multiple lenders to find a suitable mortgage.
* Typically earns a portion of the origination fee when a loan closes.

Typical duties of a mortgage banker

• Advise borrowers on suitable loan products offered by their institution.
• Collect and verify financial documentation and property information.
• Underwrite or recommend loan approvals and handle exceptions.
• Originate and fund loans; coordinate closing.
• Manage or sell loan servicing rights as part of post-closing operations.

How mortgage bankers are paid

Mortgage bankers are usually salaried employees of their institution. Compensation may include performance-based bonuses tied to originations or loan volume. This differs from brokers, who more commonly receive a share of origination fees from closed loans.

Why mortgage bankers matter

Mortgage bankers play a central role in the mortgage process by combining origination, underwriting authority, and funding capability. Their institutional loyalty means they evaluate both borrower qualification and the loan’s risk to the lender, helping ensure loans are properly secured and priced.

Conclusion

Mortgage bankers originate and fund mortgages on behalf of a lending institution, advise borrowers on loan choices, and can approve or deny applications within their institution’s guidelines. Understanding the distinction between bankers and brokers helps borrowers decide whether to work through a lender’s mortgage banker or a broker who can shop multiple lenders.