Which of the following entities is most likely to self-fund a mortgage transaction?

• A. Depository institution
• B. Credit union
• C. Mortgage broker
• D. Private investor

Answer: (A)

A depository institution, such as a commercial bank or a savings and loan association, is most likely to self-fund a mortgage transaction because these entities have access to substantial pools of capital from customer deposits. They have the ability to originate, underwrite, and service their own loans, making them capable of self-funding.

Unlike mortgage brokers, which primarily act as intermediaries between borrowers and lenders and do not use their own funds to close loans, depository institutions have the resources and regulatory framework necessary to manage mortgage portfolios. They can keep the loans on their balance sheets or package them for selling to investors, thus providing them with flexibility and control over the mortgage process.

Additionally, while credit unions also have the capacity to self-fund, they typically cater to a specific membership base and may have less access to varied funding sources compared to larger depository institutions. Private investors often focus on individual transactions rather than the array of funding that depository institutions can provide, thus making them less likely to consistently self-fund mortgage transactions.