The Advantages of Correspondent Lending

In mortgage lending, there are two types of lenders: depository institutions and non-depository institutions. Depository institutions are banks and credit unions that take deposits from customers and use those funds to make loans. Non-depository institutions, on the other hand, are companies that don’t take deposits but instead rely on capital markets to fund their lending operations. Correspondent lenders are a type of non-depository institution. In this blog post, we’ll discuss the advantages of correspondent lending and pros of becoming one.

This article was originally published on September 22, 2022.

Top 3 Benefits of Correspondent Lending

There are several advantages to becoming a correspondent lender.

Loan Programs Variety

First and foremost, correspondent lenders have access to a wider variety of loan programs than depository institutions. This is because correspondent lenders are not restricted by the guidelines set forth by the Federal Home Loan Mortgage Corporation (Freddie Mac) and the Federal National Mortgage Association (Fannie Mae). As a result, correspondent lenders can offer their customers a greater number of loan options.

Additionally, because they’re not beholden to Freddie Mac and Fannie Mae guidelines, correspondent lenders can be more flexible with credit requirements, down payment requirements, and other factors.

Control of Own Funding

Another advantage of being a correspondent lender is that you can control your own funding. This means that you’re not at the mercy of changes in the interest rates set by Freddie Mac and Fannie Mae. Rather, you can set your own rates based on market conditions and your own business needs. Additionally, because you control your own funding, you’re not as susceptible to changes in regulations that might negatively impact depository institutions.

Networking Possibilities of Correspondent Lending

Finally, as a correspondent lender, you have the opportunity to build strong relationships with both borrowers and real estate professionals. Because you’re not tied to one particular geographic area like a bank or credit union might be, you can develop relationships with borrowers and real estate professionals all over the country. These relationships can be extremely valuable when it comes time to generate new business.

Conclusion

If you’re a mortgage broker considering becoming a correspondent lender, there are many advantages to doing so. Correspondent lenders have access to more loan programs than depository institutions, they can control their own funding, and they have the opportunity to build strong relationships with borrowers and real estate professionals all over the country. When it comes time to decide about your business’s future, keep these advantages in mind.

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