I think I have this correct. Someone elaborate.

It is the difference between the interest rates offered. Generally over 80% of a lenders business comes from a broker. The lender offers the broker a better rate (Wholesale) than he would if someone had just walked in off the street (Retail).

Does brokers gets better rate if they are getting the loan for them self ?

Of course, we don't get YSP on our own loan, unless there is some strategic advantage in doing so.

Let me start simple then go in depth.

A "retail lender" is a division of a "mortgage lender" who either offers loans directly using their own funds or warehouses them and sells them to an investor.

A retail lender usually has it's own office, staff, corporate employees, and is attached to the mortgage lender. This all adds up to high overhead expenses which means they charge a little higher interest rate to offset the expenses of having this staff, benefits, office space, and so on.

Wholesale is a division of a mortgage lender offering loans to mortgage brokers. Mortgage brokers are responsible for covering their expenses not the mortgage lender they are using. A mortgage lender has less expenses because the mortgage broker is responsible for it's overhead expenses. Therefor the mortgage lender typically can charge a lower interest rate through their wholesale lending division.

----------------------------------------------------------------

An example of a mortgage lender would be Countrywide Home Loans. They have a wholesale division and a retail division. The wholesale division can be used by mortgage brokers. So for example the company I work for Fairfield Mortgage Company can close a loan using Countrywide's Wholesale Lending.

When you see the ads on TV for Countrywide Home Loans and you call them you are speaking to their retail division.

Countrywide is a warehouse lender and a direct lender. They use their own funds for loans and they warehouse loans to be sold to investors. But, to be more specific they held most of their sub-prime mortgages and warehoused most of their conventional and alt-a loans. When they sold them to investors they retained servicing rights on most of them. So as a customer you pay your payment to Countrywide but they may only be the servicer for a fee and the actual interest and note is held by the investor they sold the loan too.

Any questions? They are a good example to use. Maybe now you understand their decline.

----------------------------------------------------------------
Benefits to a borrower...

A Retail Loan Officer typically can only use their companies products and programs. However, some of them can also use other wholesale lenders aside from themselves to close a loan. The problem is they normally are charged to do that because their company makes less money when they use a wholesale lender. So for example Wells Fargo used to and may still be able to broker loans to wholesale lending divisions of companies like Countrywide and so on. In doing so they lose being able to sell the loan to an investor through warehousing in which they make a Service Release Premium for. Or they lose holding the loan and making interest on it.

So it is still more costly in interest rates MOST of the time.

Countrywide on the other hand cannot broker loans to other wholesale divisions of mortgage lenders. Therefore you are stuck with what they have and that is it.

A mortgage broker can use several wholesale divisions of mortgage lenders shopping for the best interest rate or finding the right program to suit your specific situation. So your chances of getting the best deal and a loan period are better structured through a Mortgage Broker than a Mortgage Banker.

You cannot originate a loan for yourself as a mortgage broker. It normally is considered a conflict of interest and the mortgage lender has policies against it.