Celebrity Home Loans drops correspondent business

Celebrity Home Loans has closed its correspondent mortgage channel, according to published reports and a LinkedIn post from a company executive.

The business operated under the name Cypress Mortgage Capital.

"Starting a new business is never easy. Starting a new correspondent investor business during COVID, even more difficult and some called us crazy!" said a LinkedIn post from Jeff Ehrlich, senior vice president. "Unfortunately, we had to shut the doors at Cypress Mortgage Capital."

The closure was apparently sudden. A separate LinkedIn post from at least a week ago on Cypress' own page touted non-qualified mortgage pricing starting at 5%.

A voicemail message was left with Celebrity that was not returned by press time.

But when clicking on the correspondent tab on Celebrity's web page, a message stating "The requested URL was not found on this server" pops up.

Correspondent lending is perceived as a middle ground between wholesale and retail. Like wholesale, it allows mortgage lenders to expand their territory and add servicing rights without having to make the investment in brick-and-mortar. Generally, the two channels are lumped together as third-party originations.

Unlike wholesale, what is being sold is a closed loan. So the margins are higher than the broker business, although not as high as retail.

However, correspondent comes in many flavors, including mini-correspondent, which critics noted is akin to brokering as these originators typically are reliant on the purchaser for practically all services in manufacturing a mortgage.

The only TPO business at two of the largest banks, Wells Fargo and Chase, is correspondent because management feels they have more recourse if a loan were to go bad than they would with brokering.

But correspondent lending can have its own issues. In the first quarter, price competition in the channel caused Mr. Cooper to reduce its activity until margins normalized. And they seemed to, as in the second quarter, correspondent had a 42% share of production, up from 33% in the first quarter.

In April, Home Point Capital sold its correspondent business to Planet Home Loans as it elected to concentrate on wholesale as the mortgage business contracted.

Celebrity Home Loans' website lists affiliations with 27 active retail branches besides those that operate under the parent company's name.