Correspondent lending

How correspondent lending works

A correspondent takes the application, orders the appraisal and title, underwrites (or has the buyer underwrite) and closes the loan in its own name. The loan is then sold to the purchasing investor, either one at a time as it closes or in pools. The Office of the Comptroller of the Currency’s mortgage banking handbook describes correspondents exactly this way: they perform most or all loan processing, close in their own name and sell to the purchasing institution under a flow or a bulk sale agreement. Fannie Mae’s Selling Guide uses a similar idea in its defined term “correspondent origination.”

In private lending, the investor is usually a loan buyer or aggregator that publishes guidelines and pricing for bridge, fix-and-flip, construction or DSCR loans. The correspondent funds the loan first, from cash or a warehouse line, and is repaid when the buyer purchases it.

Why it matters to a private lender

Correspondent lending lets you originate more than your balance sheet could hold, but you carry the loan from closing until the purchase settles, and the buyer can decline a loan that misses its guidelines. Purchase agreements usually include representations and warranties and repurchase obligations, so read them closely.

Table funding is a related but different structure: the capital partner funds at closing, so you never carry the loan yourself. See correspondent lending for private lenders for a full comparison.