Different Types of Mortgage Lenders

If you’ve started shopping for a mortgage in Washington State, you’ve probably run into a handful of different types of lenders — brokers, banks, credit unions, and correspondent lenders — often used almost interchangeably. They are not the same thing, and the difference can affect your rate, your timeline, and who you’re actually talking to when something goes wrong. Here’s how each one works.

What is a Correspondent Lender?

A correspondent lender is a mortgage company that funds your loan with its own money (or a line of credit called a warehouse line), underwrites it in-house, and closes it in its own name — then typically sells the loan on the secondary market shortly after closing, often to an investor like Fannie Mae, Freddie Mac, or a larger aggregator. This is different from a mortgage broker, who never funds or underwrites the loan directly, and different from a portfolio bank, which may keep some loans on its own books indefinitely.

I work as a correspondent lender myself, and I think of it as sitting in the middle of the spectrum: you get more underwriting control and program flexibility than a broker shop typically offers, without some of the bureaucratic layers of a large depository bank.

One nuance worth knowing: selling a loan on the secondary market and having someone else service that loan are two different things. A lender can sell a loan and still retain servicing — meaning they keep collecting your payments, managing your escrow account, and answering your calls long after closing — or they can release servicing to another company entirely. We retain servicing on the majority of the loans we originate, which is something worth asking any lender you’re comparing, since it affects who you’re actually calling a year into your loan.

Correspondent Lender vs. Mortgage Broker

A mortgage broker doesn’t fund loans. A broker submits your file to one or more wholesale lenders, who underwrite, fund, and close the loan — the broker’s role ends at origination. This can mean access to a wide menu of wholesale lenders and pricing, which is a real advantage in some scenarios. But it also means the broker doesn’t control underwriting turn times, doesn’t fund in-house, and isn’t the one signing off on your file at the end.

A correspondent lender, by contrast, underwrites and funds the loan directly. That generally means:

• One point of contact from application through closing — not a hand-off to a wholesale underwriter you’ll never speak with
• More ability to work through underwriting conditions or exceptions in-house, since the underwriter may be down the hall or a phone call away
• Closing in the lender’s own name and with the lender’s own funds, which can matter for purchase timelines and earnest money deadlines

Neither model is universally “better” — a broker may find a program fit or pricing a correspondent lender doesn’t have access to, and vice versa. It’s worth asking any originator you’re interviewing whether they broker, correspond, or both, and how that affects who underwrites your file.

Correspondent Lender vs. Bank

Banks and credit unions are depository institutions — they take deposits and may keep some mortgages in their own investment portfolio rather than selling them, which is sometimes called portfolio lending. This can be useful for non-conforming scenarios a bank wants to hold onto (certain jumbo loans, for example, or relationship-based lending for existing deposit customers).

The trade-off is that a bank’s mortgage division is often one piece of a much larger, more compartmentalized organization, with mortgage lending competing for internal resources and technology investment against checking accounts, credit cards, and commercial banking. In my experience, that can show up as slower underwriting turn times or a mortgage team with less day-to-day authority to make judgment calls on a file. Often times, the processing and underwriting are done in large, out-of-state departments, instead of being local.

A correspondent lender, since mortgage lending is the core business, is generally structured around speed and program breadth in a way a diversified bank’s mortgage arm isn’t always built for. 

Where do Credit Unions fit in?

Credit unions are structurally close to banks for purposes of this comparison — they’re member-owned, not-for-profit depository institutions that may keep mortgages in portfolio rather than selling them, and mortgage lending is typically one member service among several rather than the core business. The practical differences are membership eligibility (you generally need to qualify to join, often through an employer, association, or geographic area) and, in my experience, a somewhat more relationship-driven underwriting approach for existing members. Loan program breadth and closing capacity vary quite a bit from one credit union to the next, so it’s worth asking the same questions you’d ask a bank.

Pricing and Programs

This is where correspondent lenders and brokers actually have something in common, even though they fund loans very differently: both typically have access to a wide range of programs and pricing, just through different mechanisms.

A broker shops your file across multiple wholesale lenders to find a program and price that fits. A correspondent lender typically holds approvals with multiple investors (Fannie Mae, Freddie Mac, Ginnie Mae, and often additional non-QM or jumbo investors), which gives it a comparably wide menu of loan programs and pricing options to pull from, all while underwriting and funding the loan itself. 

Banks and credit unions, by contrast, are typically limited to whatever in-house program menu they’ve built. That can still be a great fit if your scenario matches one of their programs well — but if it doesn’t, there’s often nowhere else within that institution to take it. Correspondent lenders and brokers generally have more room to find a program or pricing fit precisely because they aren’t limited to a single in-house menu.

Licensed vs. Registered Loan Originators

One more distinction worth knowing, and it’s tied to how each institution is regulated: the person taking your loan application isn’t always held to the same standard.

Loan originators at banks and credit unions are typically registered with the Nationwide Multistate Licensing System (NMLS) — required under the federal SAFE Act, but since those institutions are already regulated by federal banking regulators, their originators generally aren’t required to pass a state licensing exam, complete pre-licensing coursework, or meet ongoing state continuing education requirements.

Loan originators at non-depository lenders — mortgage brokers and correspondent lenders — are typically licensed, which means passing the SAFE Act exam, completing state pre-licensing education, ongoing annual continuing education, and background and credit checks. Some loan originators who are not able to pass the SAFE Act exam may opt to work at a bank or credit union.

You can look up any originator’s license or registration status, and their license history, on the NMLS Consumer Access website using their NMLS number — mine is #121324.

Quick comparison

	Mortgage broker	Correspondent lender	Bank	Credit union
Funds the loan directly	No	Yes	Yes	Yes
Underwrites in-house	No	Yes	Yes	Yes
May keep loans in portfolio	No	Sometimes	Sometimes	Sometimes
May retain servicing after closing	N/A	Sometimes — we retain servicing on the majority of loans we originate	Varies	Varies
Wide program and pricing options (multiple lenders or investors)	Yes — shops multiple wholesale lenders	Yes — holds approvals with multiple investors	No — limited to in-house programs	No — limited to in-house programs
Mortgage is the core business	Varies	Yes	No — one division among many	No — one member service among several
Requires membership eligibility	No	No	No	Yes
Loan originator status	Licensed	Licensed	Registered (not state-licensed)	Registered (not state-licensed)

Why this matters for your mortgage

The label on the door matters less than the questions you ask. Before you commit to an originator, I’d encourage you to ask directly: Do you fund and underwrite this loan yourselves, or is it sent out to a wholesale investor? Who makes the final underwriting decision, and how quickly can they usually turn around conditions? If this loan doesn’t fit standard guidelines, do you have any flexibility, or is it an automatic decline?

I work for a correspondent lender that also has a robust portfolio program and the ability to broker a loan when something doesn’t fit what we’re able to offer in-house.

Frequently asked questions

Is a correspondent lender the same as a direct lender?

The terms overlap a lot in everyday use. “Direct lender” is a broader, less formal term for any lender that funds loans itself — correspondent lenders, portfolio banks, and some large non-bank lenders all describe themselves as direct lenders. “Correspondent lender” specifically refers to a lender that typically sells the loans it funds on the secondary market shortly after closing, rather than keeping them.

Does it cost more to use a correspondent lender instead of a broker?

Not inherently. Pricing depends on the specific loan program, your credit and financial profile, and market conditions that day — not on whether the company brokers or funds directly. It may be worth comparing loan estimates from a few originators regardless of their business model.

Will my loan get sold after closing if I use a correspondent lender?

Often, yes — this is standard in the industry and doesn’t change your loan terms, rate, or payment. What may change is who services your loan (collects your payment each month), which is separate from who originated it. Federal law requires advance notice before a servicing transfer.

How do I check if my loan officer is licensed?

You can look up any loan originator on NMLS Consumer Access using their name or NMLS number. The listing will show whether they’re licensed or registered, which states they’re authorized in, and their license history, including any disciplinary actions.