In preparation to expand, but wary of high-commitment, one high-production brokerage is testing the waters of “mini-correspondent” lending.
Jay Voorhees, is co-owner of JVM Lending, a sophisticated mortgage brokerage in Walnut, Creek, California. He says that in-light of positive production figures over the last years, he has been approached by six or eight lenders who either want to acquire the company and/or be part of its production.
Wary of his past, when his company was tied to one lender and could be cut-off at any moment, JVM and Voorhees are being particularly careful about establishing high-risk relationships.
That is why JVM is working on setting up several mini-correspondent relationships, whereby his company contracts to sell a small amount of loans to several lenders who will underwrite, condition, and close the loan. The relationship works much like the way a wholesale brokerage model does, but on a contracted basis, where the underwriting remains (and the risk with it) remains with the investor. In this way, JVM can also avoid having to require an in-house underwriter, the way a full-fledged correspondent would, he said.
Mini-correspondent relationships allow the company to gain more control over the loan closing process but still underwrite the loan in the investor’s name.
“We don’t want to ‘wed’ ourselves to one lender,” he says, which is what his company did pre-2010 when it was a correspondent lender for Flagstar Bank, who eventually cut-off correspondents. After that episode, JVM went back to being solely a wholesale brokerage.
Now, pricing advantages have led the company back to the correspondent channel, but it is doing so on more cautious terms.
"We are testing our relationships for the next six months and will hopefully be aligned with one or two by the end of the year," he said.