Using information provided by wholesale lenders, Lending Arsenal’s multi-lender loan pricing search engine for mortgage professionals effectively uses information from top wholesale lenders to help you compare sales quotes with rates and rebates, all tailored to your borrower's loan scenario.

Wholesale lenders are lenders that work only with mortgage brokers. These lenders accept loan packages, underwrite and fund loans. Borrowers are not able to gain direct access to resources provided by wholesale lenders; these lenders require a B2B relationship with mortgage brokers. Thus, wholesale lending relies on establishment of close connections between mortgage brokers and wholesale lenders.

While some lenders might have retail branches that sell loans directly to borrowers, all wholesale lenders depend on mortgage brokers to originate loans. Wholesale lenders provide brokers with loans at wholesale prices, having more competitive quotes than loans sold through retail. Brokers, in turn, sell these loans to borrowers, sometimes adding fees that make the final price of the loan be close to the retail value offered by the lender. The price, however, might not always be the same as the retail price, depending on how much the mortgage broker decides to charge for services. Also, depending on rates of originated loans, brokers receive broker rebate points (also known as yield spread premiums or YSPs) from wholesale lenders. These points usually range from par to 2 points or more, par meaning no YSPs are being paid and 2 points meaning that 2 percent of the loan amount will be awarded to the broker (1 point = 1% of originated loan). The higher the rate on the loan is, the more broker rebate points are awarded to originators.

It is common for lenders, including wholesale lenders, to create packets of originated loans and sell them on the secondary mortgage market. This allows wholesale lenders to turn over the money they invested, make some profit, and to reinvest the money they get from the sale into further operations. The loan packages are purchased either by other lenders or by Fannie Mae and Freddie Mac (government subsidized entities), which enjoy a lower-than-normal-lenders cost of borrowing money. In the latter case, the sold loans must be conforming, meeting specific standards, like a certain maximum Loan-to-Value ratio, or a certain minimum borrower credit score, just to give a few examples. The readiness of Fannie Mae and Freddie Mac to buy up loans creates a stabilizing effect on the mortgage industry and keeps the cost of borrowing relatively low.

The availability of numerous wholesale lenders and the diversity of the programs that those lenders offer somewhat complicate the wholesale lending industry. Each lender offers a broad range of programs based on factors such as borrower’s financial situations, desires and needs. The combination of all these parameters comprises a “loan scenario.” Depending both on the given borrower’s loan scenario and on the particular lender’s risk assessments, money could be less or more expensive to borrow. In order for brokers to come up with the most competitive quote for a given loan scenario, they must submit loan scenarios to each wholesale lender individually and then attempt to compare those scenarios side by side. This procedure is either highly error-prone or takes a long time to complete, considering that information about a particular loan scenario has to be processed anew for each individual lender, often resulting in a smaller number of sales or loss of customers altogether. Such outcome necessitates the use of multiple lender pricing engines, such as Lending Arsenal, in order to compare loan options from multiple lenders, while only having to enter loan scenario once.