Correspondents vs. Retail Channels - Understanding Default Risk
By Madeline Johnson, CMB and Jonathan Glowacki, FSA, CERA, MAAA

The correspondent business channel originated over $300 billion of mortgages in 2016. According to Milliman's Default Score1 model, correspondent lenders have originated purchase loans for sale to the government-sponsored enterprises (GSEs) with higher risks of default compared with the retail channel.

  • Specifically, Milliman's Default Score model indicates that correspondent originations for purchase loans have approximately 10% more default risk than retail originations over the same time period.
  • Loans with higher default rates cost more to service and could potentially have higher guarantee fees from the GSEs.

Read this expert analysis from Milliman, one of the world's largest providers of actuarial and related products and services. Its Mortgage Banking Practice provides analytical solutions to the mortgage banking industry. Through the LoanHD® Loan Scoring Module , both Milliman mortgage default and repurchase scores are available directly through the platform.

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