mortgage company is an organization engaged in the commercial business of financing mortgages for either residential or commercial real estate. Usually, a mortgage company is the actual originator of a loan; however, it usually sells itself to various potential borrowers and seeks financing from among any of the many financial institutions that provide such funds for the loan itself. A mortgage company may be a bank or a private lender; the latter being the case more often than not since most commercial real estate loans are usually originated by banks. Interested readers can find more information about them at Prime Mortgage.
The typical mortgage company – with its many sub-agencies and sales outlets – exists simply to underwrite mortgage loans on behalf of banks or other third-party financial institutions and facilitate the processing of the loans as and when required by the bank or lender. This is in contrast to the financing arm of the industry, which is the lender, whose primary activity is acquiring the loan and facilitating the processing thereof. Lenders purchase mortgage loans from the mortgage company or sub-bank and then resell them to customers. In fact, the lender is the true creator of the mortgage; he is the person who executes the legal obligation of lending and who ultimately maintains the integrity of the loan. In contrast, mortgage companies act as sales representatives for banks and facilitate the transaction; they basically sell the idea of the loan and make profits from it.
The practice of mortgage companies dates back to the early nineteenth century when chartered banks regularly sold their portfolios of financial instruments in order to stem the loss of lending funds to individuals and businesses. For example, in the United States, bank mortgages were originally created and funded by the U.S. Treasury Department in return for the guaranteed payment of interest and principal at designated facilities, including on home mortgage loans. Since home mortgage loans have been such a successful industry, several competing mortgage companies have emerged over time.