When you apply for a loan, whether it’s a mortgage, auto loan, or personal loan, your application moves through a specific path known as the loan origination channel. This channel influences how your loan is processed, who you interact with, and potentially the cost and terms you receive.
There are three primary loan origination channels:
1. Retail Channel (Direct from Lender)
In this channel, you apply directly to a bank, credit union, or online lender that will fund your loan. You deal directly with a loan officer employed by that institution. Retail channels are straightforward and convenient for borrowers who prefer working with known banks or institutions, often offering streamlined services and sometimes relationship-based discounts.
2. Wholesale Channel (Through a Broker)
This channel involves a mortgage or loan broker who acts as an intermediary between you and multiple lenders. Brokers work on your behalf to find competitive rates and terms by comparing offers from various wholesale lenders. While brokers facilitate the application and communication process, the actual loan funding comes from one of their lender partners. This channel is beneficial for borrowers seeking broader loan options, specialized loan products, or expert guidance through the loan process.
3. Correspondent Channel (Small Lender with Loan Sale)
A correspondent lender originates and funds your loan using their own capital but typically sells the loan to a larger financial institution shortly after closing. From your perspective, the process feels like retail lending, but your loan servicer might change after closing. This model helps smaller lenders manage capital and continue offering loans effectively.
| Feature | Retail Channel | Wholesale Channel | Correspondent Channel |
|---|---|---|---|
| Who You Work With | Loan officer at the lending bank | Independent broker | Loan officer at a smaller lender |
| Loan Options | Limited to bank’s products | Access to many lenders | Limited to lender’s products |
| Compensation | Salary/commission from employer | Broker fee paid by lender (may affect cost) | Profit on loan sale and fees |
| Experience | One lender from application to closing | Broker facilitates, loan by lender | Feels like retail; servicer changes |
Why It Matters
Your loan origination channel affects your interest rates, fees, loan product variety, and customer service. For example, brokers may provide access to niche loan products or better rates by comparing multiple lenders, while retail lenders often provide personalized service and relationship perks.
Common Questions
- Is one channel always cheaper? No. Compare Loan Estimates from multiple sources to find the best total cost.
- Why was my loan sold after closing? This is standard for correspondent loans and does not change your loan terms.
- How do I know which channel my lender uses? Ask your loan officer or broker if they work with one or multiple lenders and if loans are sold post-closing.
For more about loan brokers, see Mortgage Broker. To understand loan servicing after sale, visit Correspondent Lending. For help with loan offers, check Loan Officer Compensation.
Learn more about loan options and how they affect your borrowing at the Consumer Financial Protection Bureau (CFPB).
