Confusion among brokers about the difference between correspondent and through lending has prompted key players to discuss the development of new definitions to clarify the processes.
Representatives from correspondent lenders, including GMAC-RFC, Platform Home Loans, Mortgages plc, Preferred Mortgages and SPML, debated the issue at a recent meeting organised by National Guarantee. A unanimous decision was made, establishing the first industry-wide definitions for the different sectors.
Peter Beaumont, sales and marketing director at Mortgages plc, said due to forthcoming regulation, the sectors will need to become more transparent and the definitions worked towards this goal.
‘Lenders use different terms to describe correspondent lending, such as branded correspondent lending or true correspondent lending. This means brokers, who have seen new lenders entering the market, have not understood who they are dealing with. A major issue going forward is transparency. Clarifying the definitions is a step towards this,’ he said.
Keith Robinson, managing director of National Guarantee, said agree-ing what constitutes correspondent lending is a major milestone for the specialist mortgage industry.
‘With a common ground between the sector’s major players, we hope to bring a greater understanding of the precise benefits of correspondent lending and through lending to intermediaries and their clients,’ he said.
The definitions to clarify through lending and corresponding lending are:
• Correspondent lending: the term to be used going forward when describing a relationship between lenders and third parties (typically large packagers) who are marketing themselves as correspondents and rely on third parties to provide funding lines.
• Through lending: the definition to be used when describing a relationship between two lenders, whereby one organisation uses its own capital to lend money to the public and then sells on the loan to a third party.