The intent of the following article is to provide an overview of mortgage industry correspondent lending, the resulting mortgage loan production and demonstrate one of the methods that investors use to track and report loan production numbers for risk management and seller performance monitoring purposes.
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In an effort to offer more loan products and remain competitive in today’s expanded marketplace both the bank and mortgage brokers participate in correspondent or wholesale lending programs. Correspondent and wholesale lenders refer to the banks and mortgage brokers that sell them loans by many names – Originators, Brokers, Lenders, Sellers or Correspondents. For the purpose of this article the banks and mortgage companies that originate the loans are “Sellers” and the correspondent or wholesale lenders that fund or buy the loan from the seller are “Investors”. Sellers, based on investors’ guidelines, make a lending decision and fund the mortgage loan using their own money, the investor’s money or a warehouse line of credit. As soon as the loan has closed, it is sold to an investor at a previously negotiated price. This dynamic works great for the borrower. The borrower is dealing with the seller who will close the loan, and the seller is able to shop the mortgage around thereby obtaining the borrower a lower interest rate.
Investors count the loans that they purchase from sellers as production. Investors typically report production numbers for a seller by loan program. A loan program can have many loan products that fall underneath its umbrella. For example, the investor may have a loan program type of “Conforming Fixed” and underneath the “Conforming Fixed” program umbrella the investor may offer 10-Year, 15-Year, 20-Year, 25-Year and 30-Year “Conforming Fixed” products.
The “Reporting Seller Mortgage Loan Production” section of this article details steps for creating a report that an investor may use to track and report seller production by loan program type. A disproportionate percentage of loan production for a single loan program type from a seller could represent a significant risk to the investor. The Sample Mortgage Loan Production Report in this article can be used as a model for stand alone report or incorporated into a comprehensive Seller Scorecard report.
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