Loan agency is a popular term used in commercial capital markets to describe specific kinds of unsecured loan funding, most often referred to as bilateral or syndicated loans. In both cases, an organization, also called a lender, has to obtain financing from a financial institution that lends more money than it actually has money or can borrow. A loan agency, however, is specifically focused on arranging such financing for its clients. PLAN A Mortgage-Loan Agency
Loan agencies take a variety of different forms. Most common are direct lending institutions like banks and credit unions that lend money through the use of securities, usually in the form of bonds or equity. However, there are also broker dealers that do not specialize in any one kind of finance. They buy up wholesale interest rates from major financial institutions and then sell them to their customers, who then secure the loans using collateral such as their home or car.
Many syndicated loan agencies have come under serious pressure recently due to the current global financial crisis. While a number of companies have suffered significant losses, others have continued to provide funding to their clients. Many brokers working for the direct lending institutions were involved in the mis-selling of some of these syndicated bilateral loans. The problem is that because these borrowers did not actually need the financing that they had secured – such as through a house or car – they were given financing based on what the lenders wanted to see: the borrower purchasing a car or house so that they could live off the interest of the loan. Because of this, many of these borrowers are now stuck with underwater mortgages and saddled with large legal fees and a dwindling ability to repay their debt.