For those banks that are correspondent lenders on the secondary market, who is in charge of compliance on these loans? Our name is on the docs as the lender and then after approximately three days they are sold. Thanks!

You are.
Treat every loan as if it's not going to be bought by the investor. Make sure everything is the way it should be. You don't want to have to buy back the loan because there's an error the investor doesn't want to live with.

Also, check the contract with your investor. The contract should tell you under what conditions you may have to buy back the loan (compliance errors, etc).

This is an asset quality issue. Look at your promises in the contracts between you and the investors. Your bank represents and warrants each loan you deliver to be free of legal/regulatory defects. Like any other product you sell, there should be sufficient quality controls in place to assure that you deliver no less than the fully compliant paper you offered for sale to the investor.

Has anyone had any luck in negotiating the content of these contracts so that they aren't so one-sided?

Remember always the Golden Rule -
"He who has the gold makes the rule!"

As a follow up to these responses - we are new to the secondary market. I have previously worked for other institutions that participated, but it has been a very long time. At the time, my previous institution instituted their own QC program, then sent the loans to an outsourced QC program. At that point, the mortgage loan was available to be sold to investors. My question is: Is there a requirement somewhere for there to be an internal QC performed? We currently have a QC plan with the outsourced group - is that enough? Can anyone give me a brief description of what our obligations are being the table funder? Thank you!

You really need to be asking your investors about this question. If you want the rules from FNMA, they can be found here: https://selling-guide.fanniemae.com...grams-Plans-and-Processes-08-07-2019.htm

Thank you, Randy. I have a QC document that was provided by an outside QC vendor; however, it seems as there are a lot of requirements of the bank also. I was hoping to get some examples of what other institutions may have in place as far as responsibility goes. Have you seen any other institutions that work similarly to what is stated above? Thanks!

Are you required to perform QC internally rather than outsource it? Not that I am aware of. However, secondary QC requirements only involved a sample of loans and happen after the fact. Most secondary market lenders have some sort of QC set up for all loans either internally or externally, unless you want a bunch of repurchases landing on your doorstep.

We sell to Freddie and we outsource the post-closing QC requirements, primarily due to the re-verification requirements.