On July 9, 2014, the Consumer Financial Protection Bureau (“CFPB” or “Bureau”) issued Policy Guidance on the issue of Mortgage Brokers Transitioning to Mini-Correspondent Lenders (“Policy Guidance”), which highlights risks and considerations that should be taken into account by brokers who may be considering or venturing into the mini-correspondent channel.
The Mini-Correspondent Model
Mini-correspondents are mortgage lenders that close the loans in their own name but that operate with limited net worth. Mini-correspondents fund mortgage loans using warehouse lines of credit, which are sometimes supplied by the entities that will purchase the loans. Mini-correspondents vary in size and structure, but many have leaner operations and staffing than lenders in other channels. Under some—but not all—arrangements, the investor may underwrite, condition, and issue closing instructions as is done in the broker/wholesale model. Continue reading this entry