Home | Site Map

Financial Industry Resources Directory

Welcome to our site about the Financial Industry. We have gathered information about the many things associated with this industry. We have provided information about the differences between a mortgage banker and a mortgage broker and have clarified what they do. The different professions possible within this field will also be provided with detailed information explaining what the position requires and what they do. Also, many terms will be clarified and defined for you throughout this site. If you are interested in building a profession around the financial industry, this site will be most useful and helpful for you. If you are interested and would like to know more, read on through the site.

Site Topics

What does a Mortgage Banker do?

The mortgage banker is the lender; the one making the loan directly. A mortgage banker will present you with only that lender's program of mortgages, so you need to speak with several lenders to do comparative shopping. You can look at the real estate section of your local newspaper to get an overview of lenders in your area and their rates. The background of mortgage banking are: Depository institutions have traditionally originated residential mortgage loans to hold in their loan portfolios, and mortgage banking is a natural extension of this traditional origination process. Although it can include loan origination, mortgage banking goes beyond this basic activity. A bank that only originates and holds mortgage loans in its loan portfolio has not engaged in mortgage banking as defined here. Those activities are discussed elsewhere in the Comptroller’s Handbook.

Mortgage banking generally involves loan originations, purchases, and sales through the secondary mortgage market. A mortgage bank can retain or sell loans it originates and retain or sell the servicing on those loans. Through mortgage banking, national banks can and do participate in any or a combination of these activities. Banks can also participate in mortgage banking activities by purchasing rather than originating loans.

The mortgage banking industry is highly competitive and involves many firms and intense competition. Firms engaged in mortgage banking vary in size from very small, local firms to exceptionally large, nationwide operations. Commercial banks and their subsidiaries and affiliates make up a large and growing proportion of the mortgage banking industry.

Mortgage banking activities generate fee income and provide cross-selling opportunities that enhance a bank’s retail banking franchise. The general shift from traditional lending to mortgage banking activities has taken place in the context of a more recent general shift by commercial banks from interest income activities to non-interest, fee generating activities.

Fundamentals of Mortgage Banking: When a bank originates a mortgage loan, it is creating two commodities, a loan and the right to service the loan. The secondary market values and trades each of these commodities daily. Mortgage bankers create economic value by producing these assets at a cost that is less than their market value.

Given the cyclical nature of mortgage banking and the trend to greater industry consolidation, banks must maximize efficiencies and economies of scale to compete effectively. Mortgage banking operations can realize efficiencies by using systems and technology that enhance loan processing or servicing activities. The largest mortgage servicing operations invest heavily in technology to manage and process large volumes of individual mortgages with differing payments, taxes, insurance, disbursements, etc. They also operate complex telephone systems to handle customer service, collections, and foreclosures. This highly developed infrastructure enables mortgage banks to effectively handle large and rapidly growing portfolios.

Mortgage banking operations also need effective information systems to identify the value created and cost incurred to produce different mortgage products. This is especially critical for banks that retain servicing rights. To optimize earnings on servicing assets, mortgage banks must have cost-efficient servicing operations and effective, integrated information systems.

Risks Associated with Mortgage Banking: The applicable risks associated with mortgage banking are: credit risk, interest rate risk, price risk, transaction risk, liquidity risk, compliance risk, strategic risk, and reputation risk.

These are discussed more fully in the following paragraphs.

Credit Risk: In mortgage banking, credit risk arises in a number of ways. For example, if the quality of loans produced or serviced deteriorates, the bank will not be able to sell the loans at prevailing market prices. Purchasers of these assets will discount their bid prices or avoid acquisition if credit problems exist. Poor credit quality can also result in the loss of favorable terms or the possible cancellation of contracts with secondary market agencies.

For banks that service loans for others, credit risk directly affects the market value and profitability of a bank’s mortgage servicing portfolio. Most servicing agreements require services to remit principal and interest payments to investors and keep property taxes and hazard insurance premiums current even when they have not received payments from past due borrowers. These agreements also require the bank to undertake costly collection efforts on behalf of investors.

A mortgage bank can be exposed to counter party credit risk if a counter party fails to meet its obligation, for example because of financial difficulties. Counter parties associated with mortgage banking activities include broker/dealers, correspondent lenders, private mortgage insurers, vendors, subservicers, and loan closing agents. If a counter party becomes financially unstable or experiences operational difficulties, the bank may be unable to collect receivables owed to it or may be forced to seek services elsewhere. Because of its exposure to the financial performance of Counter parties, a bank should monitor Counter parties’ actions on a regular basis and should perform appropriate analysis of their financial stability.

Interest Rate Risk: Changes in interest rates pose significant risks to mortgage banking activities in several ways. Accordingly, effective risk management practices and oversight by the Asset/Liability Committee, or a similar committee, are essential elements of a well-managed mortgage banking operation.

Transaction Risk: To be successful, a mortgage banking operation must be able to originate, sell, and service large volumes of loans efficiently. Transaction risks that are not controlled can cause the company substantial losses. To manage transaction risk, a mortgage banking operation should employ competent management and staff, maintain effective internal controls, and use comprehensive management information systems.

Liquidity Risk: In mortgage banking, credit and transaction risk weaknesses can cause liquidity problems if the bank fails to underwrite or service loans in a manner that meets investors’ requirements.

Compliance Risk: Mortgage banking managers must be aware of fair lending requirements and implement effective procedures and controls to help them identify practices that could result in discriminatory treatment of any class of borrowers.

Strategic Risk: In mortgage banking activities, strategic risk can expose the bank to financial losses caused by changes in the quantity or quality of products, services, operating controls, management supervision, hedging decisions, acquisitions, competition, and technology. To limit strategic risk, management should understand the economic dynamics and market conditions of the industry, including the cost structure and profitability of each major segment of mortgage banking operations, to ensure initiatives are based upon sound information.

 

Read more about the Financial Industry by Clicking on the Links on the Left.

 

 

Daily Updated Free Resources for Consumers:

 

--Below resources were provided by other online users.
We highly encourage you to visit them as they may be helpful to you:



  • While I was searching the net for houses for sale, my eye caught a site that had homes for sale Sitka. I always heard good things about Sitka so I decided to take a look at the properties that were for sale. I found many of the homes for sale Sitka to be so great and I decided to purchase my property from them.

  • Whether you are in Santa Monica or West Hollywood, if you are searching for custom size area rugs, then check out Melrose Carpet. You will thank me.

  • When I was looking for some nice doormats for my home, I came across this site and found out that they make really nice and industrial matss and have a big selection of other things such as kitchen mats as well as braided rugs and more. I decided to go ahead and buy the personalized doormat and a kitchen rug.

  • One of my friends has a nice home and she told me about the excellent staff at long island kitchen cabinet refacing. She said that the crew at long island kitchen cabinet refacing does outstanding work. She endorses this long island kitchen cabinet hardware as well as some long island decorative hardware and some attractive long island kitchen cabinets.

  • Now that my sister is expecting another child, she and her husband want to move into a larger home. They sat down with a professional Harker Heights Realtor and they read over a home value report killeen texas. This harker Heights Realtor also took them around to see some beautiful fort hood real estate.

  • My brother in law is in the food process industry and quite often finds himself spending way too much money on chemical process equipment. Therefore, he asked me if I knew of any chemical process equipment that was for sale and I told him that his best bet would be to look online.

  • My boss asked me to find a company that can get us construction forklifts fast. So I found a company that got us 3 construction forklifts for rent for 4 weeks. So glad I found them, plus they were local to me in Pennsylvania.

  • Last month one of my cousins and her husband started house hunting and they went to look at some homes for sale in copperas cove texas. She told me that these homes for sale in copperas cove texas are wonderful and they would like to make an offer soon. She said that this copperas cove area is wonderful.

  • If you would like to sign-up your teen to weeklong baseball tournaments then go to cooperstownbaseballworld.com and see all the week long tournaments they have available.

  • If you want the best realtors in Harker Heights go to fthoodproperties.com and read their bios - you will be impressed with their high level of professionalism and their real estate expertise.

  • If you needed a company to do your corrugated box, I recommend Corrbox; they have the best corrugated shipping boxes Los Angeles CA has to offer.

  • If you are looking for updated data on Fort Hood foreclosures, then check out Forthoodrealestate.com. That is the only site I used to find a flip foreclosed homes.

  • I was looking for a top notch manufacturer of heavy duty conveyors, but it had to be made in the USA. I found the perfect company in Rhodes Conveyors, as they make top of the line conveyors and they manufacture them in their plant in Kentucky.

  • I was looking for a sanding booth for my company, one of my brothers told me to check out the sanding booth here. This sanding booth is designed for removal of dust particles through proper filtration. I decided to purchase this sanding booth for my company needs. It is really designed to meet my needs.

  • I was looking for a metal company that sold the type of static seals I was looking for. That was when one of my colleagues told me about MetallicSealsInc.us. He told me he usually finds what he is looking for at that store, so that was when I knew I had to give them a try.

  • I run a hotel and I wanted to order customer custom logo mats several of my colleagues recommended I used custommadefloormats.com. So I placed two orders of customer elevator mats and one order of a custom doormat from them for my office and I was so pleased. I immediately order two food service mats from them to for the kitchen area. I rated custommadefloormats.com with a perfect 5 stars when I completed my survey about my experience with them.

  • I found the best site for rental homes, as it actually gives you the average rental rates in the area for a similar house. The site is called FortHoodrentalproperties.com. In my view it offers the most detailed information on rental homes Killeen Texas has to offer.

  • I asked my sponsor at the AA meeting if he can recommend a caring sober living home, and he said the best home for sober living Hollywood has to offer is via Miracle Terrace. I checked out their site at miracleterrace.com and the stories of all those recovering addicted truly inspired me.

  • I am so impressed with my portable retractable spray booths that I had RSI Systems in Kentucky manufacture for my company.

  • Given that I play in the church praise band, I would strongly recommend some outstanding church songs armenian. I asked around and I was told about a website that plays these church songs armenian. I would also strongly recommend some beautiful armenian music as well as some talented armenian musicians.

  • Best medical center for plastic surgery Bakersfield has to offer is via Dr. Roger Kohn MD's clinic. Check him out there.

  • As a business owner, I believe in planning ahead. I was on the web recently and I came across a site that sells some crisis management software. I was interested in this crisis management software so I decided to do some more research. I found out that this software program is outstanding and I recommend it to others.

  • A few days ago I was looking at an article in a manufacturing journal about some outstanding fiberglass dust collection. I decided to ask around and I found out that these abrasive media recovery floors are both safe and reliable. I would also recommend using some production assembly conveyors that are highly efficient.






 

 

Mortgage Banker | Mortgage Broker | Financial Analyst | Financial Advisor | Budget Analyst | Investment Banker | Commercial Banker | Insurance Broker | Credit Analyst | Asset Manager | Plant Controller | Real Estate Broker | Risk Analyst | Contract Negotiator | Accountant | Senior Internal Auditor | Private Banker | Business Analyst | Internal Auditor | Controller Position in OFFM | Option Trading | Trust Officer | Home | Site Map