Origination Channel is the source through which a mortgage loan is originated, such as retail (direct to consumers), wholesale (through mortgage brokers), or correspondent (lenders fund loans using their own funds).
Types of Origination Channels
The three primary origination channels are:
- Retail: In the retail channel, mortgage loans are originated directly by lenders or financial institutions and offered directly to consumers. Lenders have their own loan officers or staff who work directly with borrowers to handle the loan application, underwriting, and closing processes. This channel involves a direct relationship between the lender and the borrower.
- Wholesale: The wholesale channel involves the use of mortgage brokers who act as intermediaries between borrowers and lenders. Mortgage brokers work with multiple lenders to offer loan options to borrowers. The brokers facilitate the loan origination process, including submitting the loan application and supporting documentation to the lender for underwriting. The lender funds the loan, but the initial interaction with the borrower is through the mortgage broker.
- Correspondent: In the correspondent channel, lenders fund mortgage loans using their own funds. However, they may rely on mortgage brokers or other financial institutions to gather loan documentation and process the loan application. The lender retains ownership of the loan but may sell it to investors in the secondary market after closing. This channel allows lenders to delegate certain tasks while maintaining control over the loan process.
Each origination channel has its own characteristics, advantages, and considerations. Borrowers can choose the channel that best suits their needs, preferences, and circumstances when seeking a mortgage loan.
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