Has anyone ever heard of, or worked with a correspondent lender. We're looking at a company to refinance a group of houses and small multi's we have and they have given us the best quote so far, but of course there are fees associated with it. They describe a correspondent lender as "Correspondent lenders are almost like a hybrid between lenders and brokers. They can fund your mortgage themselves, or they can get your mortgage funded by a traditional lender. However, even when they send your mortgage out of house for funding, they can complete the underwriting process in-house, giving them more control and quicker turnaround than a broker." Anyone have any experience with these sort of lenders? Thanks
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That term was not used, but I did a mortgage like that. I thought I was dealing with a broker. But they actually funded the loan and then resold it to Freddie Mac (IIRC) shortly after closing. It went OK. There were some issues with timing due to seasoning requirements that caused a bit of hassle, but the loan itself went OK.
I used to own a correspondent lending branch. They were very common when I was in the business. They are better described as brokers that have a line of credit with a particular lender. They generally make more money if they fund your loan with their line, but if it doesn't fit the underwriting criteria they will broker the loan to a different lender. If they have the best rate, terms and fees I would recommend using them. Let me know if you have any specific questions.
I was a correspondent lender for a national bank when I use to do retail. The term correspondent lender get's obscured in some states as their licensing doesn't formally use that term but in the industry it's fairly common.
A correspondent lender will have a relationship with a senior bank in the form of a credit line or allocated credit line, usually a known name lender/bank, that ultimately capitalizes the loan through the line of credit. CL's do from time to time have in house underwriting which does speed up approvals. Not all loan programs flowing from the sponsoring bank (the one the originator is a correspondent to) are eligible under the same relationship structure as CL. For instance, sometimes a CL is barred from writing FHA loans. This depends on the qualification of the on staff underwriter for the CL. In order to do Fannie/Freddie deals the underwriter has to be a Designated Underwriter with experience and a certificate.
The idea of "funding themselves" is a bit of a sales pitch idea. No correspondent lender has complete capital discretion like a portfolio bank. (then again, neither does a bank intending to sell to the agencies) That lies solely with the sponsor bank (or ultimnate investor). Usually a system is put in place (through some tech) that allows the CL to underwrite and call for the loan to be documented and funded. The DE (Designated Underwriter) can clear loan stipulations on their own and then turns to the Sponsor for docs and funding. Essentially, the CL pushes a bunch of buttons, which the sponsor monitors checks and then acts. The CL will have a responsibility to the Sponsor Bank for pull through rates and buybacks, but I suppose that is too much information for this post.
Can they move faster? Yes. Why? It's the CL's staff underwriting and calling for docs and funding. There are less hands toughing the file in order to get it funded.
Are their rates better or anything else 'better'? A CL will have an edge over a simple broker in loan pricing based on the incentives that come with the credit line given to the CL from the Sponsor. For instance, a CL might get an extra 0.25% in fees for putting loans on their line with the Sponsor Bank. So, if the CL chooses to pass that on to the consumer, then yes, their rate could be better. Sometimes still second place to a stand alone bank by a 0.125% or 0.25%.
Thank you for the responses, this has been very helpful.
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