Wholesale Mortgage Lenders

One kind of mortgage lender that average people probably won’t have to deal with is a wholesale mortgage lender.

Wholesale mortgage lenders are companies that lend money to other lenders that issue mortgages to the public. Wholesale mortgage lenders are the companies that set the mortgage rates because they create the mortgages in the first place.

Examples of wholesale mortgage lenders include Freddie Mac and Fannie Mae which were created by Congress to make sure that lots of mortgage money is available to average Americans. There are also many private wholesale mortgage lenders that underwrite mortgages.

How Wholesale Mortgage Lenders Work

The way the wholesale mortgage process works is pretty simple. A wholesale mortgage lender makes mortgages available for sale. A mortgage lender or broker then buys these mortgages and issues them to property owners. The property owners use the mortgages to finance the purchase or refinance of property.

The wholesale mortgage lender may retain ownership of the mortgage or it may sell it to another lender. Many wholesale mortgage lenders issue mortgage backed securities which are used to finance mortgages. The trading of these securities is a big business that generates trillions of dollars in profit each year.

Commercial Wholesale Mortgage Lenders 

Wholesale mortgage lending is quite different for commercial mortgages than it is for home mortgages. Generally commercial mortgage lending is more speculative and profit oriented.

Many wholesale commercial transactions are backed by commercial paper or loans issued and traded on various exchanges around the world. These transactions generate more income but they also provide a higher risk.

The most popular instrument for backing commercial mortgages is called the London Interbank Overnight Rate or LIBOR. London is the center of credit trading and the LIBOR is the standard rate for trading commercial paper.

Larger businesses or businesses with a lot of cash flow might save some money by dealing directly with a commercial wholesale lender. The commercial wholesale lender could eliminate some mortgage charges and get the enterprise a better rate. Only a business that makes quite a few mortgage transactions should deal directly with a commercial wholesale lender.

Wholesale Mortgage Lending and You

Wholesale mortgage lenders will usually not affect homeowners and average people who seek mortgages. Most homebuyers deal with mortgage brokers and direct lenders who buy mortgages from wholesale mortgage lenders.

The only time most people buy from whole mortgage lenders would be if they were operating as a mortgage broker or lender. There are whole mortgage lenders that advertise online and make their products available to any accredited mortgage broker or lender.

Professional real estate investors might consider dealing directly with a commercial wholesale lender in an effort to save money. Wholesale lenders might be able to get real estate investors a better interest rate and terms on mortgages. Only investors that make a lot of mortgage transactions should consider doing business with a wholesale mortgage lender.