Who are "correspondent lenders " ?? Are they risks ?

Should be no problem here. Correspondent lenders are simply brokers that have a line of credit from the bank that buys the loan.

For instance, let's say I am a correspondent lender. Let's say that Vintage Park Funding has a 10 million dollar Line of Credit from CHASE. The bank that buys your loan is CHASE (and they may sell it after your loan closes also) but Vintage Park Funding's name is on the loan documents. Vintage Park would fund your loan based on the underwriting standards of CHASE, and then would sell it to CHASE at closing.

Does this help? A correspondent lender is simply a broker that has a bank's line of credit, and is selling it to that bank at closing. They "correspond" with the bank.

ksh,

DY is on the money there.  The designation of Correspondent Lender is a mortgage originator that closes/funds the loan in their own name with "their own money".  Most times, leverage is used and they actually "borrow" the money from a credit line.  Correspondent Lenders DO NOT SERVICE LOANS.  They are a "Broker on Steroids".  Sometimes they can get a little better pricing, BUT that efficiency or bulk savings is hardly ever seen by a consumer directly.  What funding allows a Correspondent Lender to do vs. a Broker is NOT HAVING TO DISCLOSE THEIR INCOME FROM THE LOAN.  The funny part is a Broker, Lender, or Correspondent has a right to be paid/compensated for work and if the interest rate/costs were the same form these 3 different parties, the compensation would also be very close, yet it is only the Broker who must show it as he did not fund it.  There's your Correspondent 102 info as DY gave you the 101.  Good luck on  your closing.

Correspondent Lending 103.

When corresponding the loan the correspondent lender is making the loan decision.  They underwrite it they fund it and at closing it will be assigned to the bank that the loan will be sold to.  Not really that different from a loan being brokered.

I have the ability to act as a correspondent, broker or lender.  From my experience my order of preference is Lender, correspondent then broker.  I am somewhat of a control freak and the more control I have over a file the better I feel about the file. 

That's me 99 out of 100 times the consumer wouldn't know the difference until they got the bill.  I give my clients the option upfront and let them know that the best pricing could be through any one of the chanels.

"Broker on Steroids"....that's funny, I like that.

While I agree with SalemFive's point about a banker having more control, I'm afraid right now that that is a moot point unless the loan is portfolioed, because as of right now, all loans are being underwritten to investor standards.

David,

In general we all do underwrite to investor guidelines, however different lenders have different contracts with Fannie and Freddie so somtimes one lender has a contractual exception that another doesn't have.

Now more than ever I want to maintain control over a file, I want the loan committed so that if the guideline changes I can honor the deal as it was structured.

DY,

You are correcto about the point being moot now more than ever..We have vanilla and uh vanilla.  If you step out of line.... bang..  The subtle differences with FNMA/FHLMC are microscopic at best and also means it is an "exception" in a contract and not the rule.  Exceptions are so slight to me that I really don't bother with them. There isn't a Lender or Correspondent that is happy to be that if they were designated that during the last 2 years as all, "A" and every other typ of lender has a vault full of garbage.  If an "exception" type loan is locked in and delivered in time just like that of anyone else, it's all good.  There is no magic anywhere for any of us.  Here in FL, "Steroid Brokers" who used a credit line and were Correspondents or Lenders are trying to revert back like a bad condo conversion as they all found out the additional .375% gross SRP is/was not worht the risk and all found out that Funding loans has its drawbacks.  If we all simply loan money to people who pay it back... we wouldn't be where we are.

RIGHT ON!!! Martin

MM,

I just know the grass is only greener over the area with poop on it.. We all have/get the same stuff within eyelashes of one another. What we really do is a craft. Some are better than others, some are cheaper, etc.  I just call it like I see it and don't plan on stepping on anyone's toes, but if all h*** breaks loose, I have the truth as to how our overall business works on my side. How's all in MI?  You in the heart of FLAGSTAR and ABN aren't you?  How's your market holding up? 

Martin,

A small Broker with a Line of credit could be put out of business very quickly if they can't get loans off their lines of credit.  A broker that doesn't have a line doesn't have that concern.  They also don't have any exposure to risk on the loans they broker.  The lack of broker risk for writing bad loans is one reason I would not be suprised if lenders start to eliminate broker channels and keep correspondent channels open.  As a correspondent lender you are on the hook.

Just my opionion and we all know what is said about opinions.

AA,

We are seeing small, large and gigantic Lenders and the likes destroyed and effectively out of business. A Correspondent is on the hook only until they run out of money repurchasing the garbage they booked, BK and go away to work at Home Depot like the countless on that website listed. Public companies like CFC, C, NCC and countless others are not even able to keep the doors open without capital..  Small "Punk" Brokers with a LOC to masquerade as a Correspondent Lender, hence the "Broker on Steroids" funny. Anyone who wrote bad loans should be punished. Brokers, Corr Lenders and Lenders alike.  I will be willing to place a friendly wager that your company Lender/Corr owns some loans on a repur agreement as I have yet to meet anyone in the indsutry (Lending & Corr) who hasn't gotten the "I want a refund" call.  I a a Broker, and no I'm not high and mighty and probably just very lucky, but I don't originate loans to lower-scored people, I don't make "exceptions" as I don't need them and I don't and never did put a client in a loan that went south.  This is about the company we keep and what we elect to do for a living.  Designations of lender or anything else really doesn't define who any of us are. Like I said earlier, if we didn't lend money (an much of it as new programs/exceptions, etc...)  we would not have had 2 things:  the unsustained rise and now the wreckage that will ripple much further than any care to think.  Subprime fallout has reached food prices...  sick, but true..

Andy, If the broker is going to share in the risk......then they have to share in the reward. The banks have pigged out on profit for over 50 years with these mortgages. Do you really think they are willing to or going to share any of the profits? As it is brokers do a great job (well, most of them) of taking care of moving some pretty archiac product and handing the bank a complete file that will return profits for years at a miniscule expense to the bank. Most correspondent lenders would close their door if they were called on very many of their loans. And reopen under another name. Your main advantage as a correspondent lender is that some of your weaker salespeople won't have to explain YSP. 

Martin,

I didn't mean to hit a nerve.  I pretty much agree with everything you have said.  I agree that anyone that wrote a bad loan should have to take responsibility for the loans they originated.

Which brings me to Mortgage Masters:

If they are going to share in the risk they have to share in the reward...I don't get paid residuals...my reward is my commission. 

"As it is brokers do a great job (Well, most of them)" 

There are good brokers and there are bad brokers...there are good lenders and bad lenders. 

AA,

No nerves hit here, but BEEP BEEP BEEP.. back up for a few seconds..  MM has a very valid argument that any Correspondent would/will fold like a used Subprime manilla folder if they were asked to back the truck up and buy their garbage.  Any and every LENDER and CORR LENDER is built on leverage and we are all deleveraging.  We have seen them collapse and go to Dubai and every other hole to survive. I am again going to guess your company has been spanked as well because we all have, even Buffets Bank. All the non FNMA product that was pushed onto the market was booked at much higher spreads, that's why it was everywhere and now the payers have to clean it up.  For the record,  there is not any "spread" in CONV business as any profitability is from MASSIVE VOLUME only...  1 faux pas in crummy U/W or 2ndary doesn't hedge correxctly and TIMBER!!!   Did we all forget who Capital Commerce was during the 2005 REFI run?  the spike month of JUN 2005-JUL 2005 and the whole company imploded...  $3bill/month of FNMA product and gone  no hedging in the market...  It happens time and time and we all have short memories. Wholesalers (real wholesalers who sold FNMA loans to WELLS only made about 40bp per loan for the wholesale channel.  Secondary takes their piece etc.  MM,  for FNMA, there is not a distinct advantage for Corr pricing wise, but I fully agree that the "phone officer" can lie about income as I have seen it all the time.  If I can get 101.3 at 6% for 30YR FIXED today, I don' think any competitor is getting 101.3 at 5.5% that's all.