*Correspondent And Wholesale Are Alive And Well*
**By Ben Wu**
***It seems like I am always reading headlines about the demise of wholesale and correspondent. I’m here to say that even though the landscape has been visibly altered, it hasn’t been the bad thing many predicted. The correspondent channel is definitely growing, but the wholesale channel has dwindled over the last few years. Nonetheless, both channels have indeed changed. Some of the big players have exited, but that has set the stage for smaller players to step up. The success of this sector actually stems from the exit of the major players like B of A and others all but disappearing for one reason or another. Here’s how some of our correspondent and wholesale clients have adapted.
****First, the exit of some larger players is leaving a vacuum that mid-tier players can fill. Second, some active lenders that have a retail channel are now looking to add a correspondent channel as a growth mechanism. So, they’re looking to see what it takes to be successful in this area. They need help.
****Just to share our experience here at Calyx Software, we were talking with one such lender and they realized that they needed to offer an automated underwriting system on their website to thrive in this new sector and compete with those already offering instant decisioning. Why? Brokers and other third-party originators need to come to your site and get a decision in seconds. Time is money.
****Today you can do that through DU, but in that case you are picking up the cost. Every time a DU decision is rendered the lender has to pay a fee even if the loan doesn’t close. That adds up and I don’t know of any lender actively looking to add more cost. To the contrary, they want to be more efficient and more competitive.
****However, adding AUS functionality on your website doesn’t have to be a huge roadblock to adding a wholesale or correspondent channel. Actually it’s pretty easy to incorporate this feature within your Web presence if you’re aligned with the right technology provider. For example, we at Calyx can cut the fees associated with AUS decisions in half or more. If the lender uses our LoanScoreCard AUS for FHA loans, the broker or TPO visiting the lender website will receive a comparable result to DU.
****Here’s what I mean: If the lender has a DU integration, they would also have a 1003 on their site so that once the required fields are completed, the system triggers DU to render a decision. From there the lender is charged a DU fee. Lenders now have the option to change their website to trigger a proprietary AUS that will render a comparable decision. The transition is transparent to the end user and it’s cheaper for the lenders—giving them a prime opportunity to enter these new sectors and potentially grow their business. As the tide turns and more wholesale and correspondent lenders enter the market, to be competitive they will need to take advantage of all the cost savings and efficiency their technology can offer.
Ben Wu has over 18 years of experience in the mortgage industry and is one of the founding members of Calyx Software. Joining the company in 1994, Ben wrote the code for the first Windows version of Point. Since that pivotal project in Calyx history, Ben has overseen the creation of several Calyx solutions, including the PointCentral banking system, WebCaster consumer portal, and the Calyx Decisioning Systems suite of automated underwriting and pricing engines. He has been instrumental in the conception and implementation of corporate strategies, including the purchase of Loan-Score, from which Calyx Decisioning Systems was derived. Ben holds a Bachelors degree from U.C. Berkeley and a Masters degree from Stanford in Computer Science.