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Competition Heating Up as Brokers Become ‘Minis’

NOV 1, 2013 7:00pm ET
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WE’RE HEARING competition in the correspondent channel is heating up and some banks are reaching out to mortgage brokers and asking them to join their “mini-correspondent” programs. 

The intent is to convert brokers into mortgage bankers by offering them warehouse lines so they can fund their own loans.

The banks realize the brokers are entering a whole new world with the qualified mortgage rule going into effect in January. The brokers are going to get squeezed by the 3% cap on points and fees, since their entire check from their wholesaler counts towards the 3% cap.

Becoming a mini-correspondent eliminates that hardship. They still have to contend with the QM rule’s cap on points and fees. But the only compensation counted toward the 3% cap is the loan officer’s comp.

Wells Fargo Funding executive vice president Eric Stoddard noted that the brokers are seeking relief from the QM rule. “The industry is watching to see what happens to brokers and the wholesale market and if there is more migration toward the mini-correspondent model,” he said.

Stoddard stressed in an interview that Wells Fargo does not offer a mini-correspondent program. As the nation’s largest correspondent lender, Wells Fargo Funding is staying with its traditional correspondent model of buying mortgages from mortgage banking companies, banks and other depository institutions.

Back on the banks of the Potomac, it was filibuster time on Capitol Hill. Republicans’ success in filibustering Rep. Mel Watt could lead to their undoing if President Obama sacks the current GSE regulator Edward DeMarco.

The president has selected the North Carolina congressman to run the Federal Housing Finance Agency because it is time for an individual with proven legislative skills to work with Congress in forging legislation that winds down Fannie Mae and Freddie Mac and replaces them with a new secondary market structure.

However, GOP senators are very comfortable with the current FHFA acting director and his plans for gradually downsizing the GSEs in the absence of legislative action.

But DeMarco has lost favor with a lot of industry groups. They are no longer pleased by his talk of reducing the GSE loan limits and raising the guarantee fees by another 10 basis points, even if he delays such actions until mid-2014.

We are hearing that the White House also is tired of DeMarco who seems to think he is all-powerful due to his Republican support in the House and Senate.

But some people just don’t know when to leave. If Watt is not confirmed, don’t be surprised if the little Caesar is sacked and the president appoints someone else to be the GSE regulator.

Mark Fogarty is editorial director of the SourceMedia Mortgage Group and has been commenting on the mortgage market since 1984. Brian Collins is the group’s senior editor and D.C. bureau chief. He has worked the mortgage beat since 1988.

Comments (2)
The story says "But the only compensation counted toward the 3% cap is the loan officer's comp." In fact, if the loan originator is an employee of either the broker or the creditor (and a mini-correspondent will be a creditor under the rule) the compensation paid to that loan originator employee IS NOT included in the 3% calculation. [12 CFR 1026.32(b)(1)(ii)]
Posted by DENNIS S | Monday, November 04 2013 at 11:24AM ET
Becoming a Mini Correspondent is a good plan to eliminate the discriminatory 3% fee cap against brokers BUT we have 2 big hurdles in NY which are the $250,000.00 net worth requirement and costly 3 year audited financial statement requirement to obtaining a correspondent license.
Posted by ABC 123 Mortgage, Inc. | Monday, November 04 2013 at 12:15PM ET
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