Mortgage brokers considering a move into non-delegated correspondent lending shouldn't count on a windfall from better pricing. The bigger opportunity may be gaining enough control over the lending process to close more loans, offer different products, and build a more profitable business.
That was a central message from mortgage executives who have made the transition, along with a warehouse lending specialist, during National Mortgage Professional's Oct. 6 NMP Ignite webinar, The Risks and Rewards of Going Non-Del, presented by Primis Bank.
"I think if you go into this expecting to get, you know, 50 basis points better pricing, you're fooling yourself," said Dre Roberts, executive vice president and president of warehouse lending at Primis Bank. "I would honestly go into this thinking I'm going to get about the same pricing. It's really about me having control."
Roberts, who said he has helped nearly 1,000 companies transition from brokerage to mortgage banking over his 25-year career, recalled asking one correspondent customer whether the move had made his business more profitable.
The customer wasn't necessarily making more money on each loan, Roberts said. He was making more money because he was closing more loans.
It's an important distinction for brokers weighing whether the potential gains justify the additional capital, compliance and operational responsibilities.
Why Brokers Are Making The Move
Under the non-delegated correspondent model, a mortgage company closes loans in its own name using warehouse financing, while the investor purchasing the loan generally handles underwriting.
That arrangement gives the correspondent more control over parts of the transaction that traditionally fall under the wholesale lender's authority, including pricing decisions, certain closing processes, and the borrower-facing experience.
For Lamont Harris Jr., CEO of Harris Capital Mortgage Group, the decision was driven largely by what he could offer borrowers, particularly military veterans.
"For me, the biggest game changer was for my VA client," Harris said. "Going non-del presented the greatest opportunity for me to be able to give back to them."
Harris, whose career has included both retail and wholesale lending, said his company went all in on non-delegated correspondent lending at the end of 2022.
His priorities were straightforward: find ways to save borrowers money while creating additional revenue opportunities for the business.
But he cautioned against assuming every transaction would produce a higher margin.
"You're not always going to make more money on every single transaction," Harris said. "But having the flexibility is something that I think that a lot of brokers take for granted."
Tyler Flora, CEO of SunnyHill Financial, described a similar calculation, although his company approached the transition by identifying potential obstacles before committing.
Flora said his business partner, who had capital markets experience, initially opposed the move because of the perceived risks and costs. Flora asked him to list the problems they needed to solve.
After negotiating with technology providers and lending partners, Flora said SunnyHill was able to make the transition with just $50 in additional monthly technology costs, apart from the operational expenses associated with the new model.
The company also gained access to product structures that weren't available through its wholesale relationships at the time.
One example was lender-paid temporary 2-1 buydowns, which Flora said SunnyHill negotiated with investor partners before similar options became more widely available through wholesale channels.
That flexibility proved valuable when rates increased, giving the company another option for borrowers who wanted to refinance or reduce their initial payment burden.
For Flora, the advantage wasn't simply a better rate sheet. It was being able to negotiate how loans were structured and delivered rather than being limited to the options available through a wholesale channel.
The Capital Requirements May Be Lower Than Brokers Expect
One of the biggest concerns for brokers considering non-del is whether they have enough capital to qualify for warehouse financing.
Roberts said Primis Bank typically looks for approximately $150,000 in net worth, with at least 25% held in cash. The bank generally offers warehouse capacity of up to 20 times a company's tangible net worth, meaning a company with $150,000 in qualifying net worth could potentially obtain a $3 million line.
Those figures reflect Primis' lending standards, not industrywide requirements. Roberts said the bank may also consider companies with lower net worth depending on their financial condition and growth trajectory.
Warehouse lenders may require personal guarantees or pledged funds, review financial statements quarterly, and impose covenants that borrowers must maintain.
The financing itself also carries costs. Roberts said Primis typically advances 99% of a loan's note amount, leaving the correspondent to cover the remaining 1%, although borrower-paid fees may help offset that requirement.
Beyond financing, companies must address state licensing, Mortgage Electronic Registration Systems (MERS) registration, insurance, investor approvals, and other operational requirements.
But Roberts pushed back on the idea that becoming a correspondent requires building an entirely new back office.
"You don't necessarily need to hire anyone," he said, explaining that third-party providers can handle functions that otherwise require additional employees.
He said emerging correspondent lenders that maintained variable rather than fixed expenses were often better positioned to weather the sharp downturn following the refinancing boom.
Flora's experience supports that approach. Rather than replacing his company's entire technology platform or immediately expanding staff, he negotiated arrangements with existing partners to handle certain functions.
He nevertheless recommended having someone dedicated to post-closing work, with the expense supported by efficient warehouse-line turnover.
Where The Risks Become Real
The potential downside of non-del becomes particularly clear after a loan closes.
Unlike a traditional broker transaction, the correspondent funds the loan and must ensure the investor purchases it. Delays can tie up warehouse capacity, generate financing costs, and expose the company to additional expenses.
Flora described a recent transaction in which a loan remained on SunnyHill's warehouse line for 21 days because of an issue he attributed to the purchasing lender.
"We had a loan sitting on here for 21 days. Wasn't our fault. It was the lender's fault," Flora said.
Rather than escalating the dispute, SunnyHill worked with the lender to resolve the issue. Flora said his company ultimately bore the financing cost for seven days.
The experience reinforced his view that investor and warehouse lender relationships are critical to managing the risks.
Harris offered another example of how post-closing problems can affect profitability.
He recalled a loan whose rate lock expired after closing but before the investor purchased it. The investor required the company to relock the loan, creating an unexpected expense.
"Post-closing is something that can really be taken for granted," Harris said. "Post-close on this side of things, this is the most important part."
His company now typically builds an additional five to seven days into its lock strategy to account for the time needed to complete the sale.
Harris said his operation has reduced its time on the warehouse line to approximately three days, a significant improvement from when the company first entered correspondent lending.
He advised brokers to avoid making the transition too quickly.
"I do think that you should really, really start slow in the process," Harris said, emphasizing the importance of coordinating with warehouse lenders and investors before funding loans.
Roberts also warned that loans investors decline to purchase can become particularly expensive.
Depending on the circumstances, a correspondent may need to correct a defect, find another investor, refinance the loan or sell it at a discount. Repurchase and indemnification obligations can create further exposure.
Even when an investor handles underwriting, the correspondent does not eliminate those risks.
Brokers Don't Have To Move Everything At Once
Another misconception addressed during the webinar was that brokers must abandon wholesale lending entirely to become non-delegated correspondents.
Roberts said some investors allow companies to originate loans through both channels, although others impose restrictions. He recommended confirming those policies before making the transition.
Harris, who continues to describe himself as strongly supportive of the broker channel, said the ability to operate as a correspondent has expanded his company's options without changing his underlying approach to serving borrowers.
He also reported year-over-year growth and improved profitability since the transition, although he did not provide specific financial figures.
Flora said his company approached the decision by identifying the risks, finding ways to manage them and determining whether the remaining economics justified the move.
For brokers evaluating the model, the panelists recommended speaking with investors and warehouse lenders early, reviewing state licensing requirements and identifying which operational functions can be outsourced.
Roberts suggested allowing approximately 30 days for initial warehouse-line setup, although the overall transition can take longer depending on licensing, MERS registration, investor approvals, and other requirements.
The audience's concerns reflected the same practical challenges. In a poll during the webinar, capital and net worth requirements ranked as the leading barrier to going non-del, followed by repurchase risk and staffing or operational infrastructure.
A separate poll found 39% of respondents were already operating as non-delegated correspondents, while nearly a quarter were actively evaluating the move. The results reflect a self-selected webinar audience, not a representative survey of mortgage brokers.
The discussion also comes amid a broader reassessment of how independent mortgage companies structure their businesses. NMP recently reported on NEXA Lending's acquisition of UMortgage, a transaction that offers another approach to gaining scale and infrastructure without building every operational function independently.
For brokers considering non-del, the central question isn't whether correspondent pricing beats wholesale on a particular loan. It's whether the added control, product flexibility, and production opportunities outweigh the costs and responsibilities of funding loans themselves.
As Harris put it, "You're not going to know what you don't know until you just step out there."
The challenge is making sure the business is prepared for what comes next.
For more conversations on the issues shaping the mortgage industry, including strategies to grow your business, stay tuned for upcoming NMP Ignite webinars. Visit NMP's webinar page to see what's coming up and register for future sessions.
