Detailed Definition
A Mortgage Correspondent is a financial intermediary who manages the servicing of loans. This role includes a variety of responsibilities such as:
- Collecting monthly mortgage payments from borrowers.
- Paying real estate taxes and homeowner’s insurance premiums.
- Processing escrow payments.
- Ensuring properties are properly insured.
- Handling other administrative duties required for maintaining the loan.
Mortgage correspondents do not originate loans but rather manage the life cycle of a loan after it has been processed and funded by a lender. They operate on behalf of the lender or investor who owns the loan, receiving a fee, typically a small percentage of the loan balance, for their services.
Examples
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Good Money Savings Association Example: The Good Money Savings Association purchases a package of 1,000 loans in another state and hires a mortgage correspondent to handle the loan servicing. The correspondent is responsible for collecting the monthly mortgage payments, ensuring the payment of real estate taxes, confirming that property insurance is maintained, and more. As compensation, the correspondent receives 3/8 of 1% of the mortgage balance annually.
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XYZ Banking Agency Example: XYZ Banking Agency outsources the loan servicing of their mortgage portfolios to a well-known mortgage correspondent company. The correspondent collects payments, manages escrow accounts, and keeps track of insurance requirements, earning a service fee in the process.
Frequently Asked Questions (FAQs)
Q1: What are the main duties of a mortgage correspondent?
A: The primary duties include collecting mortgage payments, paying property taxes and insurance premiums from escrow accounts, and managing administrative tasks related to loan servicing.
Q2: How is a mortgage correspondent different from a mortgage broker?
A: A mortgage correspondent services existing loans, while a mortgage broker’s primary role is to originate new loans by connecting borrowers with lenders.
Q3: Who pays the mortgage correspondent’s fees?
A: The fees are typically paid by the lender or investor who owns the loan. These fees are often a percentage of the outstanding loan balance.
Q4: Are mortgage correspondents responsible for underwriting loans?
A: No, mortgage correspondents are not involved in the underwriting process. They manage the post-closing servicing of loans.
Q5: Can a mortgage correspondent service both residential and commercial loans?
A: Yes, a mortgage correspondent can service both residential and commercial loans depending on their expertise and client agreements.
Related Terms
- Mortgage Broker: A professional who helps clients find appropriate mortgage loans by acting as an intermediary between lenders and borrowers.
- Loan Servicing: The administrative aspect of loans, including collecting payments, managing escrow accounts, and ensuring that borrowers comply with mortgage obligations.
- Escrow Accounts: Accounts held by a mortgage servicer to pay insurance and tax obligations on behalf of the borrower with funds collected from monthly mortgage payments.
- Investor: An entity or individual that purchases loans or mortgage-backed securities as an investment.
Online Resources
- Consumer Financial Protection Bureau (CFPB): Offers resources and regulations regarding mortgage servicing.
- Federal Housing Finance Agency (FHFA): Provides insights into federal regulations affecting mortgage markets.
- National Mortgage Servicing Association: Information about trade standards in mortgage servicing.
References
- “Mortgage Loan Basics” by Addictions Specialists - Comprehensive guide on mortgages.
- “The Mortgage Encyclopedia: The Authoritative Guide to Mortgage Programs, Practices, Prices, and Pitfalls” by Jack Guttentag - Valuable resource on mortgage industry intricacies.
Suggested Books for Further Studies
- “The Real Estate Wholesaling Bible” by Than Merrill
- “Your Complete Guide to Real Estate Investing” by Michael B. Meyers
- “Principles of Real Estate Practice” by Stephen Mettling and David Cusic
