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Fight fraud up front

National Mortgage Professional
Nov 20, 2006

Correspondent lenders switch channels depending on niche, survey findsMortgagePress.comCorrespondent lending FAQ Most correspondent lenders now regard themselves as independent mortgage firms—not small banks or thrifts, as in the past. And, in many cases, this new breed of correspondent lender has the option of selling mortgages as either correspondents or mortgage brokers. These are some of the significant findings emerging from a new nationwide survey of correspondent lenders sponsored by Washington, D.C.-based Campbell Communications in July. The survey was used to produce a comprehensive report titled "How Correspondent Lenders Work with Their Investors." According to the new research, more than three quarters of correspondents surveyed described their firms as independent mortgage companies. Less than one-fifth of respondents classified themselves as banks or depository institutions. "Many correspondent lenders today are essentially 'super' mortgage brokers that have warehouse lines and can fund their own loans," noted Tom Popik, a principal of Nashua, N.H.-based mortgage market research firm Geosegment Systems Corporation and author of the new report. "They decide on a loan-by-loan basis whether to sell their production on a flow-correspondent or wholesale-broker basis. Our new survey captures a lot of the details surrounding this phenomenon. On average, more than a third of the correspondents reported regularly selling loans on a wholesale broker basis. This helps explain why some industry surveys suggest that mortgage brokers have accounted for 60 percent or more of total originations in recent years. The new survey finds that originators have different reasons for choosing a specific wholesale delivery channel. For example, when pricing is most important for a correspondent lender, the bulk channel is often chosen. If liability is a concern, such as with sub-prime loans, correspondents regularly opt for the wholesale broker channel. "The survey results contain a wealth of information about why correspondents choose a specific channel for selling loans to investors," Popik said. "If you are an investor, this information is extremely valuable for designing wholesale programs that appeal both to correspondents and mortgage brokers." In addition to asking correspondent lenders why they favored different channels for different loan products, the new survey asked them to rank individual investors regarding their various correspondent offerings. The research is the second in a series that tracks correspondent lenders and their relationships with investors. For more information, visit www.campbellsurveys.com.
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