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1.4.1 Creditors or Lenders

The creditor is the entity that makes a loan and whose name appears as the lender on the promissory note and mortgage.294 The words “creditor” and “lender” are often used interchangeably, but because “creditor” has a specific statutory definition under the Truth in Lending Act,295 a lender may not be considered a creditor for purposes of the Act in some circumstances. In this treatise, creditor is generally used synonymously with lender. The creditor may or may not be the party that currently holds the loan and has the right to receive payments on the loan. Creditors make loans to borrowers in what is broadly described as the “primary market” for mortgages.296 This is in contrast to the “secondary market,” described below and in § 1.2.3, supra.

Historically, financial institutions that originated loans continued to own them throughout their duration, until termination. 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, is far less common now. Today, most mortgages are sold or otherwise transferred to another entity shortly after origination, in the secondary market. As a result, the holder of the mortgage loan at the time a borrower faces foreclosure or other payment difficulties is not typically the originator.


  • 294 {216} 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.

  • 295 {217} National Consumer Law Center, Truth in Lending § 2.3 (9th ed. 2015), updated at

  • 296 Sean M. Hoskins, Katie Jones & N. Eric Weiss, Congressional Research Serv., Report No. R42995, An Overview of the Housing Finance System in the United States 1, 7 (Mar. 13, 2013).