SERVICING WITH A SMILE
The mortgage banking industry is the second most important source of housing credit in the US, after the thrift industry, accounting for about a quarter of all new residential mortgages. During the year ended September 1985, mortgage banks made an estimated $100 billion of mortgage loans.
Their name is misleading, however, because they are not really banks at all. They do not take deposits. They simply write loans, for a fee, sell the loans for a profit and then service the loans, for a fee, on behalf of the buyer. They basically exist to supplement the thrift industry's lending capability, although mortgage bankers maintain that they also enhance competition.
"Mortgage bankers are the entrepreneurs in the mortgage industry. They tend to be harder-working in their dealings with borrowers than thrift institutions; it's a very service-oriented business because that is how we make money," said Doug Shannon, executive vice president of Commonwealth Mortgage Corporation of Houston, Texas, which is the mortgage banking arm of Commonwealth Savings, also of Houston.
Mortgage banks mainly write home loans that are insured or guaranteed by one of two government agencies -- the Federal Housing Administration (FHA) or the Veterans Administration (VA) -- which tend to be more cumbersome than so-called conventional loans (which have no government involvement).