How Correspondent Lenders Work in the Mortgage Industry?

Let’s cut to it: shopping for a mortgage is overwhelming. You’ve got brokers, banks, retail lenders, and then there’s this thing called correspondent lending. What is it? And should you care?

Absolutely. Because the type of lender you work with could influence your rate, your closing timeline, and even whether your deal gets done.

This guide demystifies correspondent lending. You’ll learn what it is, why it matters, and how it stacks up against other lending options.

• Correspondent lenders originate and fund loans before selling them to larger investors.
• This model often leads to more competitive pricing and faster closings.
• Unlike brokers, correspondent lenders have more control over the process.
• Borrowers should compare correspondent lenders with banks and brokers for the best fit.
• Transparency, licensing (NMLS), and proper disclosures are crucial.

A correspondent lender originates and funds loans using their own capital. Then, shortly after closing, they sell the loan to a larger investor (think Fannie Mae, Freddie Mac, or a major bank).

• They underwrite and approve your mortgage.
• They fund the loan at closing.
• They sell the loan to an investor and use the proceeds to fund new loans.

This model helps reduce costs and streamline approvals. Unlike brokers, correspondent lenders have a direct hand in both underwriting and funding, which can result in a smoother borrower experience.

Why might a borrower choose a correspondent lender over a retail bank or broker? Here’s the breakdown:

Since they approve and fund loans in-house, correspondent lenders can close loans faster than brokers (who rely on third-party underwriting).

They often pass savings on to borrowers because they don’t hold loans long-term, reducing risk and overhead.

Most correspondent lenders work with multiple investors. That means more loan programs tailored to your situation, without hopping from lender to lender.