Last October, HousingWire highlighted several correspondent lenders and gave a broad overview of where this division of mortgage finance was heading.
We are happy to report that those lenders are still doing a robust set of business, although the road remains no less rocky. But as we said last year, at least there’s a road to begin with.
Correspondent lending is moving, but not necessarily from strength to strength. In a blog post last month, Lloyd San, mortgage market manager for insurer MGIC, emphasized that lenders need to adjust their strategies to new realities.
“While some lenders are seeking a merger/capital partner so they can continue to have growth in this market,” San writes, “others are reviewing the different channels of business and are evaluating their options as a direct servicer to offer a correspondent channel.”
In the case of the dwindling ranks of mortgage brokers, that strategy adjustment could be to move into the mini-correspondent space. The National Association of Mortgage Brokers warns that anyone considering such a move should well consider all the risks as well as benefits.
"There may be risks someone may find unfavorable as the mini-correspondent space becomes more defined," said NAMB president John Councilman during a conversation with HousingWire. "We are working closely with the Consumer Financial Protection Bureau on defining the space and we are making headway."
In a blog on HousingWire.com, the Senior Vice President of Mortgage Banking and Warehouse Lending at First Guaranty Mortgage Corporation, Ken Jones, asked why the shift appears to be irreversible.
“Has the Dodd-Frank Act all but eliminated the place of the mortgage broker in the transaction? Or, can the ever-resourceful broker find yet another way to survive the latest wave of regulation?”
“Some will lead their organizations down new paths. Some will follow the crowd. Others will either consolidate or move on. Throughout this evolution, we will be asked to learn new terms like ‘branker,’” Jones explained.
“Of course, ‘branker’ hasn’t quite made it into traditional dictionaries yet...Let’s not overlook other new terms that will become more common in the coming months and years, such as the ‘mini-c,’ the ‘delegated’ or the ‘non-delegated.’”
And, as the news in the following months showed, Jones appears to be onto something.
Correspondent Lenders we're watching:
- AFR Mortgage
- BOK Financial
- CMG Financial
- First Guaranty Mortgage Corporation
- Impac Mortgage
- JMAC Lending
- Pacific Union Financial
- Stonegate Mortgage
Everyone knows ditech Mortgage Corp. lost market share during the financial crisis for pre-crash subprime lending. When the bubble broke in 2006, it brought big losses for both ditech and those who invested in mortgage-backed securities.
However, the company has recently launched a comeback into the market, including a three-pronged business plan building its direct consumer lending, retail lending and — you guessed it — correspondent lending.
“Ditech seeks to purchase closed residential mortgage loans from financial institutions with either delegated or non-delegated UW options,” said John Davis, senior vice president of correspondent lending at ditech.
And, ditech is just one example of ever-growing interest in correspondent lending. Irvine, California-based JMAC Lending, a wholesale and correspondent lender, also announced it launched a non-delegated correspondent program in August.
“Correspondent lending is the next logical expansion since it leverages our strengths in pricing, operations and compliance expertise in wholesale to assist our clients in growing volume and revenue without incurring substantial risk,” said CEO Christina Pham.
According to MGIC’s San, a regional correspondent investor just announced an affinity relationship established with a regional bank that will offer all conventional, FHA, VA and USDA programs through them and still use the bank’s name to its customers. The reason behind all this is some large servicers and specialty mortgage servicers need to protect their existing portfolio, while also growing their origination business. And as San concluded in his blog post, “Although many are involved with MSR acquisitions, I have recently seen some start up different lending channels, such as correspondent lending, as a way to grow their servicing platform. While one could argue that the correspondent lending channel is overcrowded, most of the newer entrants are getting involved with their eyes wide open as far as volume expectations and objectives.”