Competition in the correspondent channel is heating up and some banks are reaching out to mortgage brokers and asking them 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
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.
