Regulations Will Shift Some Toward Correspondent

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There are mixed forecasts for the correspondent channel but it certainly has adherents, and 2014’s regulations will drive some players toward it.

“We feel there is a real opportunity with emerging mortgage bankers, particularly with the changes coming down in January,” Jackie Weed, vice president and director of correspondent lending for Newport, R.I.-based Embrace Home Loans, says.

“We’re going to see banks scaling back business,” she said in a phone interview with National Mortgage News earlier this year.

Whether Embrace would be involved in the non-QM market remained an open question at the time of this interview but Weed says she was confident “there will be folks that will be doing them.”

“There are nuances, but I think that there is enough information out there now to get a clearer understanding of [regulators’] approach,” says Weed, who previously worked for First Choice Loan Services Inc.

So far it appears that “if you write a loan like that you will be on the hook forever,” she says.

Embrace will do its best to accommodate the products its clients need and is counting on a “very committed customer service experience” to set it apart, says Weed.

The company offers private-label services so that community bank customers can market in their own names. This allows a bank to keep control of its customers and maintain its identity with borrowers when it comes to offering other services.

Among the products that will likely face constraints in the coming year are higher-end jumbo/larger products, as some of these loans could be affected by the loan limit reductions the Federal Housing Administration currently has planned.

Jumbo’s future in the coming year remains uncertain, Steve Calk, chairman/CEO of the Federal Savings Bank and Chicago Bancorp, said in a December phone interview with this publication.

The FHA’s Jan. 1, 2014 reduction in loans limited to $625,000 from $729,750 will drive more homebuyers to apply for a jumbo loan, which will most likely come with a higher downpayment.

“For many areas of the country this change won’t be a huge issue as average home prices fall below the established limit. However, borrowers in metropolitan areas with higher average housing prices may face challenges when applying for mortgages as the 20% downpayment associated with jumbo loans will be an enormous increase from a traditional loan’s 3.5% downpayment,” Don Frommeyer, president of NAMB, the Association of Mortgage Professionals, said in a recent outlook report.