Understanding Mortgage Bank Functions: Services & Operations

Mortgage banks are financial institutions that extend collateralized credit to consumers and commercial customers. The mortgage products extended by a bank are then serviced and collected by the institution itself. Much of the bank's day-to-day functions include monitoring current accounts and soliciting new customers.

Finding New Borrowers

Mortgage banks are often depository banks as well. These banks service the checking and savings needs of their customers. As opposed to brokerage firms and finance companies, mortgage banks often do not need to do heavy marketing or solicitation to attract new mortgage customers. Instead, these companies use directed advertising within the branch to target existing customers. However, these banks also send direct mailings--either by USPS or through email--to current customers with new mortgage loan and equity loan offers.

Originating New Loans

Most mortgage originations at mortgage banks are handled entirely in-house. Mortgage brokers, on the other hand, outsource nearly all the financial work to competing banks. Mortgage banks will take an application for a potential customer, review his qualifications--credit, income, assets--and determine the best product offered by that bank only. Next an in-house underwriter (another bank employee) will corroborate the information on the application with the help of supporting documents (paystubs, W2s). Pre-approval and approval meetings are often held with both the underwriter and the loan officer as well as the customer.

Loan Servicing

Most mortgage loans that originate at mortgage banks are serviced there as well. Mortgages originated by mortgage brokers are sold almost immediately to a larger financial institution with the infrastructure to service the loan. Small, local mortgage banks are often popular as customers develop relationships with their loan officers and banking representatives. In addition, if a mortgage customer runs into financial problems, there are often more solutions to be had if you have a personal relationship with a bank.