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A Realtor's Guide to Correspondent Lenders

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; TLW and MLW (My Lovely Wife) could probably find a Nordstrom's or two to knock off with that big ol' credit card.

Why do these "Super Brokers" morph into a form of direct lender? The answer is quite simple.

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Posted by Brian Brady- America's VA Home Loan Broker on 11/13/2006 10:15 PM

Comments (18)

realtor, hard money, san diego real estate, mortgage

Originally posted at: America's #1 Mortgage Broker: A Realtor's Guide to Correspondent Lenders

18 Comments on A Realtor's Guide to Correspondent Lenders

NOV

2006

Brian.... Wow..... excellent. I love your analogy in regards to a date and such. Funny, but worded so well, that I can use this for any new loan officer that gets into the business.

Again, great job.

Brian,

Great job :)

Ray Saenz

Bryan,

Excellent as usual.

Do you think we can ever get the public to understand a 6.000% loan that cost $3,000.00 and $1,199.10 for 360 months, from a broker is better than a 6.000% loan that cost $6,000.00 and $1,199.10 from a banker regardless of how much the first broker is making?

Bill

William J Archambault Jr

The Real Estate Investment Institute

http://www.reii.org

NOV

2006

Bill:

Let me see if I understand this:

Broker A is offering the same rate and terms as Banker B but the fees to the borrower are $3,000 less?

Then why would the amount of yield spread matter in this decision? Broker A has the best offering!

Thanks for the post.

Once again, thanks for giving us this "Behind The Scenes" understanding of one aspect of your job.

In your business, as in ours, it's the few bad apples that give the industry an unfairly bad rap.

Brian, you guys are killing me with all this info. Awesome.

Brian,

Great post... best effort comment is perfect. But in my experience the dicslosure of YSP has never been the reason I enjoy having the ability to fund loans in house. It has more to do with the control which it provides you in order to get the deal done quickly and also having the ability to change lenders when rates shift without having to resubmit the file for underwriting to another lender.

Great post!

John

BB: Gabriel's question on the YSP post inspired this. As you know, when you get heated discussion about a topic, ideas start flowing.

John: I agree with you completely. The flexibility of being able to manage the interest rate risk really is the mark of a mortgage banker. That is an interesting fact for this whole "transaparency" thing that started back in 1999. If a banker assumes credit and interest rate risk, isn't he entitled to profiting from the risk he/she took?

Great blog with some excellent information to share with those on the other side of the transaction. I worked for a broker for about 6 months when I first started in the business and hated it. To me it was worse than car salesmen, everyone trying to cut each others deals and trying to screw the buyers and stab each other in the back.... Not for me,,,, Love working for the company who makes all the calls,funds and services all the loans and don't sell them off. Closes smooth and no big yeild spreads since we are capped by Wells Fargo on how much we can charge on our yeild spread so we don't get the reputation of over charging people.

Brian,

Excellent info as always. I feel left out in the cold since I am a broker (just kidding).

Keep your Realtor Guide coming. I look forward to them.

Leo...good point, but curious...what is your cap? I am asking for a reason. I have a good idea because I worked for Norwest back in the mid to late 90's... and a few other big companies. thanks

APR

2007

I thought correspondent lenders received both YSP and SRP and have seen lenders promoting this as a benefit to LOs on their sites. This article, however, makes it sound like SRP is just the term for YSP when using a correspondent lender and that they are one and the same. Could someone clarify this for me?

APR

2007

Jim:

The two terms are identical but technically sepaerate. Both are essentially the profit for selling a higher rate loan.

JUN

2007

Received a truth in lending statment without the $10,500 Lender to Broker Fee Line

and

was told by the LO that the 10,500 would not be paid by lender to broker: "It's gone." to win your business

but

the interest rate of 7.375 is the same.

Am I wrong in believing that the 7.375 should have dropped to about 7%...maybe 6.875?

Am I wrong in believing that the LO is lying to me to get my client to sign loan docs?

Am I wrong in believing the LO is removing the number 10,500 off the paperwork

because he trying not to disclose the Lender to Broker fee?

Am I wrong in believing he legally does have to show 10,500 on the paperwork as a mortgage broker's YSP not banker's SRP?

LO says the rate is locked at 7.375 with or without the Lender to Broker fee of 10,500.

Continued from previous comment & question posted 6-29-2007

Am I wrong?

Locked yes

BUT withOUT YSP Lender to Broker fee,

I believe reprice and redraw docs with lower rate and the deal is done.

LO can make some money and call it a day...

Thank you for your attention to this repeatedly posed question.

Izabon,

It's time to get a honest lender!

One of three things are happening:

1, Your friendly broker just changed hats and is planning on closing this as a mortgage banker, and not required to disclose his income.

2. He's going to make a gift of the $10,500.00 to his wholesaler! (They're so nice we all want to tip them!)

3. He's lying, violating RESPA, and thinks you and your client are to stupid to know!

Bill

William J Archambault Jr

The Real Estate Investment Institute

http://www.reii.org

http://www.williamjarchambaultjr.com

DEC

2007

Izzabon, I run a large wholesale mortgage company. Most (not all) of our business is correspondent with 4 or 5 lenders which allows me to make handsome SRP and not have to disclose it on the HUD. But I'm a little disturbed about that fact that you "bark" to your clients about YSP that a broker is making on a loan. I originated for 4 years without the benefit of SRP, so I know what it's like to have to disclose YSP on the HUD. Quite honestly I never once had an issue with it because I took care of my clients. If I client asked asked me what the YSP "fee" was when they saw it on the HUD, I was completely honest with them. I told them that the lender paid me a premium to sell their paper. But if I ever had a realtor sitting at a closing table with me that told my client I was screwing them on rate because of the amount of YSP, I would lose it. I don't tell my clients you are getting overpaid on your 3.7% commision. Only rule I have for a realtor, don't mess with my compensation and I won't mess with yours! Thank goodness I have SRP. If the broker you mentioned did in fact remove the YSP from the HUD, of course that is wrong and he or she should be punished....but I personally have switched loans midstream from a wholesale to correspondent but never after the HUD had been written up. Just how many brokers have you ticked off anyway Izzy?

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