What type of lender uses its own funds to close loans but generally does not service them?

What type of lender uses its own funds to close loans but generally does not service them?

• A. Retail Lender
• B. Correspondent Lender
• C. Wholesale Lender
• D. Direct Lender

Answer: (B)

The type of lender that uses its own funds to close loans but typically does not service them is a correspondent lender. This classification refers to lenders who originate and fund loans using their own capital. After the loan is closed, correspondent lenders often sell the loan to larger institutions or investors, who take over the servicing responsibilities. This model allows correspondent lenders to operate with a degree of flexibility and capital efficiency since they can close loans quickly while relying on others to handle the ongoing management and payment collection. This arrangement is beneficial for correspondent lenders, as it provides them with cash flow opportunities without the long-term commitments associated with servicing loans. While retail lenders, wholesale lenders, and direct lenders each have distinct operational roles within the mortgage industry, they typically either service the loans they originate or engage in a different lending model that does not align with the characteristics defined for correspondent lenders.

The type of lender that uses its own funds to close loans but typically does not service them is a correspondent lender. This classification refers to lenders who originate and fund loans using their own capital. After the loan is closed, correspondent lenders often sell the loan to larger institutions or investors, who take over the servicing responsibilities.

This model allows correspondent lenders to operate with a degree of flexibility and capital efficiency since they can close loans quickly while relying on others to handle the ongoing management and payment collection. This arrangement is beneficial for correspondent lenders, as it provides them with cash flow opportunities without the long-term commitments associated with servicing loans.

While retail lenders, wholesale lenders, and direct lenders each have distinct operational roles within the mortgage industry, they typically either service the loans they originate or engage in a different lending model that does not align with the characteristics defined for correspondent lenders.