Both lenders and brokers perform loan origination actions, which may include qualifying borrowers and taking applications. The lender, however, approves the mortgage and disburses funds for the person taking out the mortgage. There are different types of lenders, including mortgage bankers, portfolio mortgage lenders, direct mortgage lenders, and correspondent lenders. Correspondent lenders originate and fund loans in their own name but sell them to larger mortgage lenders, which may sell them on the secondary market. If you are a correspondent lender or a borrower, it is wise to obtain legal counsel. At Pulgini & Norton, our Boston real estate attorneys represent homebuyers, sellers, associations, and lenders.Correspondent Lenders
Correspondent lending is a special type of mortgage lending involving the origination and sale of mortgages on the secondary market. A correspondent lender has its own underwriters and funds loans with its own money, unlike a broker, which never actually performs the underwriting or funding of loans. The correspondent lender usually follows the guidelines of the investor to whom the loan will be sold. They fund loans with a line of credit that may be millions of dollars. Sometimes they are small operations, licensed to operate in just a couple of states, while larger correspondent lenders may run complex operations across the country.
Correspondent lenders often have many different loan products from larger lenders or sponsors. The correspondent lender underwrites the loan, but the sponsor approves the terms. After a mortgage is sold, another company may perform the servicing by collecting monthly mortgage payments and accruing funds for insurance bills.
If you apply to get a $350,000 mortgage with a correspondent lender, the lender accesses its credit line to obtain this sum and then wires it to the title company doing the loan closing. Once the loan closing occurs, the correspondent lender sells the mortgage to an investor on the secondary market. The funds from selling the mortgage replace the $350,000 borrowed on credit.
There are advantages and disadvantages to working with correspondent lenders. You can work with someone who is making the final decision, unlike when you work with a mortgage broker. You also have many mortgage options, particularly when the correspondent lender conducts a large nationwide operation. However, problems may arise because the loan needs to be underwritten according to the standards of the larger lender servicing the loan. If problems arise with a loan obtained from a correspondent lender, it must go back from the larger lender to the correspondent lender to be fixed, and in some cases, the borrower needs to be involved in this process, even though they may have believed that they were done with the process. The borrower may also need to pay extra fees as part of the remedy.Consult a Real Estate Attorney in Boston or Surrounding Areas
A mortgage is a major financial commitment, and it is important to understand the commitment that you are making. Correspondent lenders are different from brokers, and it may be helpful to consult a Boston real estate lawyer about whether it makes sense in your particular case to obtain a loan from them. At Pulgini & Norton, our experienced mortgage attorneys may be able to guide you through each step of a residential real estate transaction. We represent buyers, sellers, associations, and lenders in Weymouth, Quincy, and Cambridge, among other Massachusetts cities. Contact Pulgini & Norton at 781-843-2200 or through our online form for a free consultation.