A Guide to Correspondent Lenders
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Correspondent lenders are a hybrid between a direct lender who sells loans to Wall Street and a mortgage broker. We (in the industry) sometimes refer to them as "Super Brokers with Big Credit Cards" because they perform all the origination functions like a mortgage broker but fund the loan in their name off of a warehouse line provided by the lender. What does that mean? It means that Super Broker has a HUGE credit card with a spending limit of...oh...about $20 million.
Why do these "Super Brokers" morph into a form of direct lender? Two reasons: better pricing and non-disclosure of yield spread premium (YSP). Actually, mortgage bankers (which is what the Super Broker morphed in to) don't refer to it as YSP; they call it Servicing Release Premium (SRP) which is a fancy word for profit when they sell the loan.
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