Will Other Correspondent Buyers Exit the Business?

Last month Wells Fargo & Co. said goodbye to it huge network of loan brokers where it ruled the roost in third-party lending. The megabank didn’t exactly provide much detail about why it left the business but it all boils down to risk: Wells just didn’t want the hassle of dealing with brokers, especially in the wake of changing loan officer compensation. Wednesday morning we were hit with the news that PHH Mortgage will be whittling down its presence in correspondent lending, which came as a shock to some. (It ranks seventh in that channel, according to National Mortgage News’ Quarterly Data Report.) Two years ago PHH hired Norm Fitzgerald as its senior vice president in charge of correspondent. His resume included CitiMortgage and Countrywide. Correspondent has been considered a ‘safe’ channel because the originating firm is ultimately on the hook – not the buyer. But PHH’s reduction in the channel raises this very basic question: Will other correspondent buyers follow suit or is PHH doing this because it keeps getting shellacked on its MSR valuations?