For lendersBy Sydney KibuukaOctober 19, 20269 min read

Correspondent Lending for Private Lenders Explained

How correspondent lending works for private lenders, delegated vs prior-approval underwriting, what aggregators require, how pricing works and how it compares.

Correspondent lending is when you originate, underwrite and close a loan in your own name, using your own funds, under a buyer's published guidelines, and then sell it to that buyer. The buyer is usually called an investor or aggregator. Fannie Mae's glossary describes it plainly: the lender correspondent "funds the loan at settlement, and the loan is closed in the name of the lender correspondent, which may or may not service the loan" (Fannie Mae Selling Guide, Glossary C).

For a private lender making business-purpose bridge, fix-and-flip or DSCR loans, it is one way to recycle capital: fund, close, sell, lend again. This guide covers delegated vs. prior-approval underwriting, what aggregators ask for, pricing, and how it compares with other structures. For every capital source in one place, see capital providers for private lenders.

Key takeaways

A correspondent closes in its own name with its own money, then sells the loan to an investor.
Delegated correspondents make the credit decision; non-delegated ones get the buyer's approval before closing.
Servicing may be released or retained, depending on the program.
Aggregators require approval, financial standards and reps and warranties backed by repurchase.
Unlike table funding, the correspondent carries the loan until sale.

How does correspondent lending work?

A correspondent takes the application, underwrites the loan to an investor's guidelines, funds it at closing with its own capital or a warehouse line, and closes it in its own name. It then delivers the file and sells the loan to the investor after closing, under a master purchase agreement.

The OCC's Mortgage Banking handbook puts it the same way from the buyer's side: "Mortgages produced by a correspondent are closed in the correspondent's name and are subsequently sold to the bank." Sales can be "flow" (loans "sold one at a time or in small groups") or bulk.

Loans with defects can be suspended, repriced or declined, and until the purchase settles, the loan is on your books.

What is the difference between delegated and non-delegated correspondent lending?

The difference is who makes the credit decision before closing. A delegated correspondent underwrites and approves loans itself, within the investor's guidelines, and the investor relies on its representations. A non-delegated, or prior-approval, correspondent sends each file to the investor, which underwrites it before the correspondent closes.

Fannie Mae's definition allows for both: the correspondent "typically underwrites the loan," but some correspondents have "not received delegated underwriting authority." The OCC expects buyers to have "effective systems to oversee delegated underwriting arrangements."

	Delegated	Non-delegated (prior approval)
Who approves the loan before closing	You	The investor
Speed	Faster	Closing waits on the investor's review
Purchase risk after closing	Higher: the file is reviewed after you fund	Lower: the investor saw the file first, though defects can still surface

Lenders often start non-delegated and earn delegated authority over time.

How is correspondent lending different from table funding, brokering and direct capital placement?

The differences come down to whose money funds the loan at closing and when the buyer commits. A correspondent funds the loan itself and sells afterwards. In table funding, the buyer funds at closing. A broker never closes in its own name. In direct capital placement, a capital partner commits before closing and funds at the table.

	Correspondent	Table funding	Brokering	Direct capital placement
Name on the loan at closing	Yours	Yours	The lender's	Yours
Who funds at closing	You (cash or warehouse line)	The capital source	The lender	One capital partner
When the buyer commits	Price locked up front; purchase after delivery and review	Before closing	Not applicable	Before closing, after seeing the full file
Your capital in the loan	All of it until purchase	None	None	None
Servicing	Released or retained, per program	Per the agreement	The lender's	You keep servicing
What you earn	Points, plus any premium on sale	Points and any agreed spread	A broker fee	Points (less a placement fee) and a yield spread

The OCC draws the same line: table-funded loans "are closed in the name of a TPO, but the bank simultaneously provides the funds and acquires the loans." See table funding for private lenders. If carrying the loan to sale means you need a credit line, compare it with a warehouse line alternative.

What are the pros and cons of correspondent lending?

The advantages are a published credit box, predictable pricing and capital that recycles once loans are bought. The drawbacks are the cash or warehouse line needed to fund every loan until sale, the risk that a loan is not purchased, and repurchase obligations that can outlast the sale by years.

Pros: a known buy box, so you quote borrowers knowing what the investor will buy and roughly at what price; capital that recycles once a loan is bought; and a possible premium when your note rate beats the investor's required yield.
Cons: you fund first and pay for that capital while the loan waits; a file defect or guideline change can leave you holding a loan you meant to sell; untrue representations can force a repurchase long after the sale; and the investor sets, and can change, the guidelines and price.
The borrower relationship: if servicing is released, the investor or its servicer deals with your borrower every month. See can private lenders keep the borrower when selling a loan.

What do aggregators require from a correspondent?

Most investors require an approval process, financial strength such as minimum net worth and liquidity, a track record, licensing where it applies, and acceptance of their guidelines. The purchase agreement then adds delivery standards, representations and warranties, and repurchase and indemnification terms that can survive each sale.

The OCC expects banks that buy from correspondents to have "a framework for the initial approval and ongoing monitoring of brokers, correspondents, and service providers," with contracts "specifying underwriting and consumer compliance criteria, periodic site visits, warranties, and recourse and indemnification provisions." Expect similar terms from a private aggregator. Read the representations closely: the OCC notes some are "credit enhancing," such as "provisions requiring repurchase for early default or premium refund clauses." Minimum net worth and liquidity figures vary by program, so get them in writing. Our lender due diligence checklist covers the documents capital sources most often ask for.

Business-purpose loans are generally outside the federal consumer mortgage rules (12 CFR 1026.3(a)), but state licensing and lending laws can still apply to you as lender of record. This is general information, not legal advice: review any correspondent agreement with counsel.

How is correspondent pricing set?

Investors publish rate sheets or pricing grids that show what they will pay for a loan, usually as a percentage of the balance, at a given note rate and risk profile. Above 100 is a premium, 100 is par, and below 100 is a discount. Adjustments for leverage, experience, loan size and servicing move that price up or down.

Two terms matter most. Under best efforts, the OCC says the seller delivers "only if the loan closes," the buyer bears the price risk, and these contracts "normally yield a lower selling price than mandatory contracts." Under mandatory delivery you must deliver or pay to get out. And if you sell servicing released, its value is paid to you in the price, which the OCC calls the "servicing release premium"; if you retain servicing, you keep a fee from each payment and the price is lower.

For a full walk-through of how buyers turn a note rate into a price, see how loan buyers price bridge and DSCR loans.

How is correspondent lending used for bridge and DSCR loans?

In business-purpose lending, several loan acquisition programs buy bridge, fix-and-flip, construction and DSCR rental loans from private lenders under published guidelines. Some fund their purchases through securitizations, so their guidelines tend to track what rating agencies and bond investors look for. Terms, servicing and delegation vary widely by program; for one example of how programs compare, see these alternatives to a large loan acquisition program.

Rating agencies publish criteria for these loans. Morningstar DBRS's 2023 residential transition loan methodology considers RTL-specific factors including "property liquidity ratio, borrower experience, project size," along with borrower liquid reserves and loan term extensions (Morningstar DBRS, 2023). KBRA published its own RTL methodology in March 2026, covering "RTL originator, aggregator, and servicer reviews" and "third-party due diligence review" (KBRA, 2026). DSCR rental loans have also been securitized; Morningstar DBRS has rated pools "backed entirely by" DSCR-program loans (Morningstar DBRS, 2020).

Your loans will be judged against guidelines shaped by how the investor finances them. For the product itself, see DSCR loans explained.

When does correspondent lending fit, and when does it not?

Correspondent lending fits lenders with reliable capital or a warehouse line, steady volume within one investor's guidelines, and the operations to deliver clean files. It fits less well if you can't fund loans to the point of sale, want to keep servicing and the borrower, or originate loans outside any single program's box.

Before signing, confirm you can fund a loan that is suspended or declined, and how long each representation survives. For the borrowing side, see our credit facility vs. warehouse line vs. forward flow guide.

Frequently asked questions

What is a correspondent lender in real estate?

A correspondent lender originates, underwrites, funds and closes loans in its own name, under an investor's guidelines, and then sells them to that investor. It may or may not keep servicing, depending on the program.

What is the difference between a correspondent lender and a broker?

A correspondent closes the loan in its own name with its own funds and then sells it. A broker arranges the loan, but it closes in another lender's name with that lender's money, and the broker earns a fee.

Do correspondent lenders need a warehouse line?

Not always, but they need some way to fund each loan until the investor buys it. Many use a warehouse line; others use their own capital. Structures where the capital source funds at closing remove that need.

How Lender Capital fits

Lender Capital is not a correspondent program; it is direct capital placement. You apply once and are reviewed, then submit each first-lien, business-purpose bridge, fix and flip, construction or DSCR loan with the full file, and we send it only to capital partners whose criteria it fits. One capital partner funds the whole loan at closing (table funded) and the loan is assigned to it at closing, so none of your cash is used. You keep your points (less the placement fee) and earn a yield spread: price the note above the partner's agreed rate and the difference is yours. You keep servicing and the borrower relationship, and the placement fee is paid at closing only when a loan funds.

Compare it with other options on the capital providers for private lenders page, read how table funding works, or apply as a lender.