Define Loan Correspondent

Define loan correspondent. Here is  short definition of what is a loan correspondent:

A loan correspondent can only originate loans that are underwritten by their sponsoring DE mortgagee. They can't underwrite, own or service FHA insured loans. A loan correspondent lender or mortgagee and each of its sponsors shall provide prompt notification to the Secretary if their loan correspondent agreement is terminated. A loan correspondent lender or mortgagee shall file an audit report with the Secretary within 90 days of the close of its fiscal year (or within such extended time as may be granted by in the sole discretion of the Secretary), and at such other times as the Secretary may request, except that a loan correspondent mortgagee meeting the definition of Sec. A loan correspondent may have one or more sponsors and a sponsor may have one or more loan correspondents.

A loan correspondent mortgagee is a mortgagee that has as its principal activity the origination of mortgages for sale or transfer to its sponsor or sponsors or that meets the definition of a supervised mortgagee but applies for approval as a loan correspondent mortgagee. A loan correspondent mortgagee may originate mortgages and submit applications for mortgage insurance but it may not hold, purchase or service insured mortgages, except that a loan correspondent mortgagee meeting the definition of a supervised mortgagee.

FHA loan origination services must be performed by a FHA-approved lender or FHA approved mortgage broker (loan correspondent). A loan correspondent may be compensated for the actual loan origination services it performs either directly by the consumer or indirectly by the FHA approved lender without being in violation of either the RESPA statute and regulations or FHA regulations.

A significant advantage exists for small mortgage bankers that obtain a loan correspondent license. By utilizing the new loan correspondent licensing category, a licensee can avoid the stringent requirements of a mortgage banker's license, including demonstration of a $1 million mortgage funding capability, a minimum tangible net worth of $250,000 and meeting the approval criteria of one of the federally related housing finance entities such as the Federal National Mortgage Association.

A loan correspondent can only originate loans that are underwritten by their sponsoring DE mortgagee. They can't underwrite, own or service FHA insured loans. This is the only type of approval a mortgage broker can apply for. Loan correspondents are also known as Mini-Eagle because they can only originate FHA loans. They must use a DE mortgagee to sponsor them in an origination. FHA loan correspondents who are banks are considered supervised loan correspondents.

Define Loan correspondent lender

A loan correspondent lender or mortgagee may sell or transfer loans or mortgages only to its sponsors, although a loan correspondent mortgagee may sell to a mortgagee that is not a sponsor with the Secretary's approval. There is no limitation on the number of sponsors that a loan correspondent lender or mortgagee may have and no limitation on the number of loan correspondents that a lender or mortgagee may sponsor.

Each sponsor shall be responsible to the Secretary for the actions of its loan correspondent lenders or mortgagees in originating loans or mortgages, unless applicable law or regulation requires specific knowledge on the part of the party to be held responsible. If specific knowledge is required, the Secretary will presume that a sponsor has knowledge of the actions of its loan correspondent lenders or mortgagees in originating loans or mortgages and the sponsor is responsible for those actions unless it can rebut the presumption with affirmative evidence.