July 11, 2014

CFPB releases guidance on 'mini-correspondent' lender model

July 14, 2014 – CFPB issued guidance last week that says those mortgage brokers transitioning to a "mini-correspondent" lender model won't necessarily get out from under consumer protection rules affecting broker compensation.

In its statement, CFPB explains that a correspondent lender goes beyond the normal task of a mortgage broker – connecting borrowers with lenders who underwrite and fund loans. Correspondent lenders commonly process applications, provide the required disclosures, often underwrite the loans, make the final credit approval decision, fund the loans and sell them to investors. The guidance clarifies how the bureau evaluates mortgage transactions involving these lenders and who must comply with the broker compensation rules.

"Before the financial crisis, consumers seeking mortgages were steered toward high-cost and risky loans that were not in the consumer's interest," said CFPB Director Richard Cordray. "The CFPB's rules on mortgage broker compensation are intended to protect consumers from this type of abuse. Today we are putting companies on notice that they cannot avoid those rules by calling themselves by a different name."