Mortgage - Home Mortgage

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There are many companies that sell mortgages to homeowners; these firms can be called lenders, brokers, dealers or underwriters.

Most of the firms that sell mortgages don’t actually underwrite or issue the mortgage itself. Instead these firms put locate a homeowner, examine them to see if they qualify for a mortgage and put together a mortgage deal. The firm then contacts a number of mortgage lenders and arranges for one of them to set up the mortgage for the homeowner.

This is why the company you send your mortgage payments to a company different from the one that sold you the mortgage. Most of the mortgage companies in your community and online are brokers that sell mortgages.

How the mortgage industry works

The companies that create the mortgages are often called underwriters they write the mortgage and they maybe separate from the broker. The company that actually issues the mortgage and collects the payments is called a lender. A lender is usually a bank or investment firm that buys large groups of mortgages as an investment. 

There are quite a few companies that buy mortgages as investments. These can be big Wall Street brokerages or investment banks or large mortgage underwriters such as GMAC, (General Motors Acceptance Corporation). It is not uncommon for a mortgage issued by a bank to be bought and sold several times as an investment.

Even though different investors “own” the mortgage, the homeowner usually notices little or no difference. The investors buy the mortgage because they want to receive the monthly payment on it. As long as the homeowner makes their payment they can usually stay in their home.

Government mortgage companies

There are also government sponsored companies that underwrite mortgages for the public. The government has set up a number of mortgage underwriters over the years in an effort to encourage homeownership among average citizens.
The two largest government mortgage companies are Fannie Mae and Freddie Mac. These are not government agencies they are companies but they were chartered by the federal government and financed by it. Their purpose is to make sure that mortgages are available to all persons who want to purchase a home.
To make things confusing, Fannie Mae and Freddie sell mortgages as investments on Wall Street and other financial markets. This is done so these entities can raise money to back mortgages for average people.

Mortgage industry changes

The mortgage industry is currently undergoing quite a few changes because of the recent financial meltdown. Some observers blame the financial crisis on the issuing of too many sub-prime mortgages by some mortgage lenders.
Sub-prime mortgages are mortgages issued to low income people who might have trouble paying off a regular mortgage. The so called sub-prime mortgage crisis occurred when many of these people couldn’t pay their mortgages.

There will be many changes to the mortgage industry in the years ahead because of the financial catastrophe. The nature of these changes isn’t known but there could be stricter regulations and new regulatory agencies. Anyone interested in getting a mortgage should pay close attention to news stories about changes to the mortgage industry.