Chapter 31 — Further Reading

Grouped by the book's three citation tiers. Tier 1 is canonical and verifiable. Tier 2 is real industry practice whose specifics change — treat every figure in a Tier 2 source as perishable and verify it at the source before you quote it to a borrower or an agent. Tier 3 is constructed teaching material from this book.

If you read only one thing

Your own employer's third-party originator agreement or warehouse credit agreement — whichever one applies to you. Not a summary of it. The document.

If you work for a brokerage, read the broker agreement with the wholesale lender you send the most files to. Find the compensation section, the early payoff provision, the indemnification clause, and the section describing what happens if the lender changes its compensation plan. Most brokers have never read it, and every provision in it will eventually govern a conversation about money.

If you work for a correspondent, ask to see the warehouse credit agreement, or at minimum ask your chief financial officer to walk you through the advance rate, the aging limit, and the financial covenants. You will not be permitted to keep a copy and you may not be permitted to see it at all — but the questions will tell you a great deal about the company, and the answers will tell you more.

If you work for a depository, read your institution's overlay matrix for the products you sell most and its portfolio lending guidelines. The second one is the capability your competitors do not have.

Everything else on this list is context. That one document is your job.

Tier 1 — Verified canonical

The statutes and regulations that define the roles

  • Real Estate Settlement Procedures Act (RESPA) and Regulation X. Contains the definition of table funding, the treatment of table-funded transactions as originations rather than secondary-market transactions, the Section 8 prohibitions on kickbacks and unearned fees, and the affiliated business arrangement disclosure requirement that governs joint ventures and in-house lenders. Read the definitions section; it is short and it settles arguments.
  • Truth in Lending Act (TILA) and Regulation Z. The definition of creditor — the person to whom the obligation is initially payable on the face of the note — and the loan originator provisions, including their specific treatment of persons who close table-funded loans in their own name. Chapter 26 owns the compensation rule; this chapter relies on the structural definitions.
  • TILA-RESPA Integrated Disclosure (TRID) rule. Where the mortgage broker is identified on the Loan Estimate, where the creditor is identified, and how borrower-paid and lender-paid compensation are presented — including the "Paid by Others" column on the Closing Disclosure that Figure 31.1 turns on.
  • S.A.F.E. Mortgage Licensing Act of 2008 and the Nationwide Multistate Licensing System (NMLS). The statutory source of the licensed-versus-registered divide and of the registration exemption for originators employed by depository institutions and certain federally regulated subsidiaries. Chapter 3 is the full treatment.
  • Dodd-Frank Wall Street Reform and Consumer Protection Act. Created the CFPB, established the supervisory architecture for non-bank mortgage lenders, and set the asset threshold that divides consumer-compliance supervision of depositories between prudential regulators and the Bureau.

The institutions

  • NMLS Consumer Access (free public search). Look up your own employer, and any employer you are interviewing with, before the interview. It will tell you the entity's license type and status by state — which is the fastest way to verify whether a company describing itself as a "direct lender" is licensed as a lender or as a broker in your state.
  • Ginnie Mae — issuer eligibility requirements and the published issuer list. The single best public window into how much of government lending is now done by non-depositories.
  • Federal Housing Finance Agency (FHFA) — minimum financial eligibility requirements for Fannie Mae and Freddie Mac seller/servicers (net worth, capital, liquidity). Read these to understand what a non-bank must hold to stay approved. Revised periodically; check the date.
  • Fannie Mae Selling Guide and Freddie Mac Seller/Servicer Guide — the seller eligibility and approval sections, which describe what a correspondent must be in order to deliver loans.
  • CFPB / FFIEC HMDA data. Free, public, current, and downloadable. Origination counts by institution and by institution type. If you want to know how much of your market is originated by non-banks, this is the answer and it costs nothing.

Tier 2 — Attributed, specifics unverified or perishable

  • CFPB guidance on mini-correspondent lenders (2014). Policy guidance setting out the questions the Bureau said it would consider in evaluating whether an entity was genuinely acting as a creditor or was functioning as a broker. The framework in §31.5 follows its shape. Verify the current guidance and any subsequent revisions before relying on it — supervisory guidance is reissued, superseded, and reinterpreted, and this book does not pin its citation.
  • Mortgage Bankers Association — origination volume, channel share, and cost-to-originate series. Widely cited industry data. Every figure is a snapshot; the cost-to-originate series in particular is quoted constantly and misquoted almost as often. Cite the year.
  • Warehouse lending practice — advance rates, haircuts, aging limits, facility fees, covenant structures, and pricing. These are negotiated, confidential, and vary by facility, by lender, and by market. There is no published benchmark and anyone who offers you one is guessing. Every such figure in this chapter is labeled constructed for exactly this reason.
  • Compensation plans — retail comp plans, brokerage splits, and lender-paid compensation percentages. These vary enormously by company, channel, market, and year, and they change. The figures in §31.8 and §31.10 are constructed illustrations of shape, never of level. Get the actual plan document.
  • Basel III capital treatment of mortgage servicing rights as implemented in the United States. The direction — restrictive treatment that made MSRs expensive for banks to hold — is well established; the specific thresholds and risk weights have been revised and are technical. Read the current rule text or a current regulatory summary rather than a secondhand description.
  • State lender licensing requirements. Many states impose net worth, surety bond, audited financial statement, and physical office requirements on entities licensed as lenders that they do not impose on brokers. These vary enormously. Your state regulator's website is the source.

Tier 3 — Illustrative and constructed (this book)

  • The Linden Street file — the \$385,000 purchase, \$365,750 loan, 6.625% with 0.500 point, 95% loan-to-value, 706 representative score, 51-day close. Constructed throughout.
  • Figure 31.1 — the three-column Section A comparison across retail, broker with lender-paid compensation, and broker with borrower-paid compensation. The retail column's \$3,657.50 origination charge and \$1,828.75 in points are this book's frozen figures; the broker columns are constructed arrangements built to the same loan amount.
  • The §31.4 warehouse worked example — 97.5% advance rate, 7.50% on a 360-day basis, 18-day purchase, 101.750 investor bid, and the 94.000 distressed alternative. Constructed to illustrate structure.
  • The §31.4 dwell-time capacity model — the \$50,000,000 line at 18-day and 30-day dwell. Constructed.
  • The §31.8 compensation illustration — 120 basis points retail, 2.250% lender-paid brokerage compensation, a 55/45 split. Constructed, and explicitly not benchmarks.
  • Case Study 31.2, Part 3 — the composite warehouse squeeze. Entirely constructed; the mechanism is assembled from documented public patterns.

Where to go next in this book

  • Chapter 3 — licensing and registration mechanics: what each requires, how sponsorship works, what happens when you move.
  • Chapter 14 — guidelines versus overlays, and representations and warranties. The chapter that explains why a bank and a non-bank can look at the same file and reach different answers.
  • Chapter 24 and Chapter 26 — RESPA Section 8 and affiliated business arrangements; the loan originator compensation rule in full.
  • Chapter 28 and Chapter 29 — the secondary market and mortgage servicing rights; how a rate is built, lender margin, and pull-through. Both are prerequisites to this chapter and both go deeper than §31.4 does on the sale itself.
  • Chapter 39 — pipeline management, which is where dwell time becomes a daily discipline rather than a concept.