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1.3.2.1 Mortgage Originator

The mortgage loan originator10 is the entity that makes the loan and whose name appears as the lender on the loan note and mortgage.11 The originator may or may not be the party that currently holds the loan and has the right to receive payments on the loan.12

Historically, financial institutions that originated loans continued to own the loan. As part of the origination process the financial institution evaluated the risk of the loan, collected payments, and adjusted the payment agreement as circumstances warranted. In this model, lenders made money by making performing loans, borrowers had unmediated access to the holder of their loan, and both lenders and borrowers had in-depth information about local markets. This unity of ownership, with its concomitant transparency, has long since passed. Today, most mortgages are sold or otherwise transferred to another entity shortly after origination. As a result, the holder of the mortgage loan at the time a borrower faces foreclosure is not typically the originator.

Footnotes

  • 10 {10} The term, “loan originator,” as used in this manner, should not be confused with the same term as used in the SAFE Act. Pub. L. No. 110-289, tit. V, 122 Stat. 2654 (July 30, 2008). Section 1503(3)(A)(i) of the SAFE Act defines “loan originator” as “an individual who (I) takes a residential mortgage loan application and (II) offers or negotiates terms of a residential mortgage loan for compensation or gain.” See § 9.9, infra (SAFE Act).

  • 11 {11} For some loans, the Mortgage Electronic Registration System (MERS) appears as the mortgage holder of record or beneficiary of the deed of trust as “nominee” for the loan originator. See § 1.3.2.4, infra.

  • 12 {12} See § 1.3.3.3, infra.