You may have heard of a newer type of mortgage lender called a “mini-correspondent.” What is a mini-correspondent and what makes it different than other types of mortgage lenders?

 

As the name implies, “mini” refers to a smaller version of a correspondent lender, which is a special type of mortgage lender that originates and funds loans in its own name. Correspondent lenders can then sell their closed loans on the “mortgage secondary market,” where mortgage originators and mortgage investors get together to do business.

 

Correspondent lenders have their own mortgage underwriting staff and fund the loans with their own money. (This is in contrast to a mortgage broker, which doesn’t do any underwriting, loan approval or funding in-house.)

 

The biggest difference between a mini-correspondent and a correspondent lender is that the “mini” version has a smaller net worth. Mini-correspondents increase the amount of funds they have available to lend by establishing relationships with one or more investor relationships.

 

Mini-correspondents access these investor funds by drawing from warehouse (credit) lines. As these loans are sold in the secondary mortgage market, the warehouse line is replenished and those funds are available to assist the next homebuyers. In this way, mini-correspondents can continue to supply a steady stream of mortgage financing.

 

Like correspondent lenders, mini-correspondents originate and close loans in their own names and are responsible for such mortgage processing activities as issuing disclosures, quality control policies, regulatory compliance at both federal and state levels, funding review and appraisal ordering. In mid-2014, the Consumer Financial Protection Bureau (CFPB) issued guidelines for the operation of mini-correspondents covering these very topics.