The Basic Definition

A correspondent lender is a mortgage lender that originates, underwrites, and funds loans using its own money or credit lines — and then sells those closed loans to larger investors, typically within a short window after closing. Unlike a mortgage broker, who never actually funds a loan, a correspondent lender has "table funding" capability and takes on the loan at closing. Unlike a direct lender or portfolio lender, it doesn't hold those loans long-term. It's the middle ground between the two.

Think of it this way: a broker arranges the dance, a correspondent lender dances, and a portfolio lender keeps dancing indefinitely.

How The Process Works

The correspondent originates the loan, processes it, underwrites it (either in-house or through delegated authority granted by the investor), and closes it under its own name. After closing, the loan is sold — usually within 30 to 90 days — to an investor, often called an "aggregator." That aggregator might be a large bank, a government-sponsored enterprise like Fannie Mae or Freddie Mac, or a major non-agency investor.

The correspondent earns revenue through the spread between the rate at which they originate and the price the investor pays on the secondary market, plus any fees collected at origination.

Delegated vs. Non-Delegated Correspondent

This is a distinction worth knowing cold. A delegated correspondent has been approved to underwrite loans using the investor's guidelines independently — meaning they make the credit decision themselves, in-house, without sending the file to the investor for underwriting sign-off before closing. A non-delegated correspondent originates and may process the loan, but submits it to the investor for underwriting approval before funding.

Delegated status requires meeting higher standards — net worth thresholds, quality control programs, performance track records — and it comes with more autonomy and typically better pricing. Many lenders start as non-delegated and work toward delegated approval as they grow.

Why It Matters For Loan Originators

If you work for a correspondent lender, you're operating in a more self-contained environment than a broker shop, but your loan products are still largely dictated by what your investors will buy. Understanding your company's investor relationships — and which investors accept which loan types — is essential to knowing what you can and can't do for your borrowers.

It also means your company carries real financial risk between the time a loan closes and the time it's sold. Warehouse lines of credit are what keep that pipeline funded, and your company's ability to consistently sell clean loans directly affects its capacity to keep originating.

Correspondent vs. Broker vs. Portfolio Lender: A Quick Comparison

A mortgage broker originates loans but uses another lender's money and guidelines, earning a fee without ever funding. A correspondent lender originates and funds the loan under its own name, then sells it. A portfolio lender originates, funds, and holds the loan on its own balance sheet indefinitely, setting its own guidelines and bearing long-term credit risk. Each model carries different regulatory obligations, capital requirements, and product flexibility.

The Takeaway

The correspondent lending model is one of the most common structures in the residential mortgage industry, and a significant portion of retail loan originators work within it without fully understanding the mechanics behind it. Knowing the difference — and knowing where your company sits in the lending ecosystem — makes you a more informed originator, a better communicator with referral partners, and ultimately a more credible professional.