Final answer:
A mortgage banker mainly offers mortgage loan origination. They may engage in making subprime loans with features like low down-payments, which have been criticized for leading to financial instability, as seen with the NINJA loans during the financial crisis.
Step-by-step explanation:
The only banking service offered by a mortgage "banker" is the origination of mortgage loans. The term "mortgage banker" refers to a specific kind of lender that originates, and often sells, mortgage loans to the secondary market. This practice is known as securitization, where loans are bundled and sold to investors.
A mortgage banker might make loans that are known as subprime loans, characterized by features like low down-payments and minimal income verification.
Securitization can lead to one notable disadvantage. If a bank keeps the mortgage, it has a strong incentive to scrutinize the borrower's ability to repay. In contrast, a bank planning to sell the loan may conduct less due diligence, leading to a higher risk of default.
As a result, subprime loans have been tied to the financial crisis, with some being labeled as NINJA loans, indicating that the borrower had No Income, No Job, or Assets.