Mortgage banking is making, selling and servicing mortgages secured by residential or commercial (i.e. income-producing) real estate. Mortgage bankers serve as middlemen, arranging and making loans using short-term funding, and then selling these loans to other lenders and investors, both within the U.S. secondary market and abroad. The buyers of mortgages include private conduits, commercial banks, thrifts, life insurance companies, pension funds, and, most significantly, the secondary market agencies -- Fannie Mae, Freddie Mac and Ginnie Mae -- through various securitization programs. Though some mortgage banking companies may be subsidiaries of depository institutions or their holding companies, mortgage companies themselves do not receive money from individual depositors.

Mortgage bankers are the primary suppliers of loans to the secondary market through programs administered by Fannie Mae, Freddie Mac and Ginnie Mae. Fannie Mae and Freddie Mac purchase primarily conventional mortgage loans, while Ginnie Mae is involved with government loans exclusively. All three agencies were created with a mission to provide liquidity to the mortgage market and affordable housing to homebuyers and renters. They currently channel approximately two-thirds of total home mortgage credit and, working with their mortgage banker partners, they have reduced the interest rate cost of credit by as much as 1/2 percent, according to housing experts.

Mortgage bankers also make use of a number of federal and state government programs to provide more affordable housing credit. For example, the U.S. Federal Housing Administration (FHA) provides mortgage insurance for residential mortgages. Over the course of its over 60-year history, FHA has insured home loans for some 20 million Americans. The U.S. Department of Veterans' Affairs (VA) administers the VA Home Loan Guaranty program which enables mortgage lenders to offer long-term, low-downpayment mortgage financing to eligible veterans. Mortgage bankers have long been the primary originators of FHA and VA loans. In addition, through a wide variety of state programs, mortgage bankers are the delivery vehicle for providing low interest rate financing to moderate-income homebuyers.

Mortgage bankers, in conjunction with their lending partners, serve a critical need in the United States. They make homeownership possible for tens of millions of Americans. They also help to build communities by providing financing for places where people can work and shop and play. And, they create important investment opportunities for the world's capital markets.

[The above quote is taken from the Mortgage Bankers Association of America website at http://www.mbaa.org/about/mission.html ]