Many real estate lenders will specialize by loan size and even by property type. These loans can come from several different sources depending on the specialization. Residential mortgages typically originate from community banks. Commercial real estate mortgages are typically much larger in size and may originate from private investment companies, commercial banks, mortgage REITs, insurance companies, pension funds, and investment banks. Mortgage bankers are typically paid in one of two ways, either by salary with a bonus, or most commonly based on the dollar amount and quantity of loans they originate or sell. Some mortgage lenders and bankers spend most of their time in front of the client selling mortgage packages, guiding clients through the application process, and assisting at the closing table. Others spend most of their time behind the scenes processing applications, determining credit quality, and underwriting the asset. Still others work in the secondary market, where they sell the completed loans to investment banks and other institutions that package loans together and sell the income stream as bonds to investors.
Information on this page provided courtesy of Cornell University Baker Program in Real Estate
Mortgage and banking is the lifeline of both the residential and commercial real estate industry. The availability and cost of capital from lenders is a strong determinate in the valuation of real estate and the ease with which transactions can take place. Currently, the real estate capital markets are in a state of flux in which the values of underlying assets have dropped tremendously, and cash flow for debt service is constrained. The future of real estate lending is still uncertain, with many lenders choosing to extend and pretend until the real estate markets begin to correct themselves. Until credit returns and capital becomes available, transactions will be scarce and value will be hard to determine. Real estate is cyclical, and eventually stability will return and capital will begin to flow again, but exactly when this will happen is still up for debate. With tremendous amount of debt maturities in the next 5 years, there will be significant opportunities in the sector.