Mary Kladde
It’s finally happening and we are getting some traction! After speaking with the Wall Street Journal and introducing the topic last week along with the subsequent testimony of John Courson (MBA President and CEO) to the House Finance Committee, lack of access to Warehouse Line Lending for independent mortgage bankers is finally getting some much needed attention. Reference the article below by James R. Hagerty and Ruth Simon:
“While Financial Giants Get Help, Smaller Home Lenders Say They Are Being Starved of Credit”
Small mortgage lenders are pushing for a slice of the federal support that is propping up giants like Bank of America Corp. and Citigroup Inc.
“These lenders, known as mortgage banks, say they are being starved of the credit they need to make home loans, reducing competition in a mortgage market increasingly dominated by a few giant banks, led by Bank of America, Wells Fargo & Co., J.P. Morgan Chase & Co. and Citigroup.
“As mortgage banks close or face credit constraints, competition to offer the lowest rates and fees is becoming less intense. “If I can only make 10 more loans, do I really want to price them at the most aggressive rate I can to get the business?” asked Jay Brinkmann, chief economist of the Mortgage Bankers Association. Guy Cecala, publisher of Inside Mortgage Finance, a trade publication, estimated mortgage rates for consumers are 0.25 to 0.5 percentage point higher than they would be if the market were as competitive as it was a few years ago.
“Mortgage banks often are small, family-owned companies. Unlike commercial banks or thrifts, they aren’t licensed to take deposits and so don’t have that source of money for their loans. Instead, they typically borrow money for the short term from so-called warehouse lenders. They use the short-term credit to provide loans to their customers and then pay back the warehouse lenders after selling the loans to bigger banks or to government-backed mortgage investors Fannie Mae and Freddie Mac.
“During the housing boom, Wall Street investment banks and many large mortgage lenders were eager to provide these warehouse lines of credit because mortgages were seen as a safe, lucrative investment. Now that house prices are falling and defaults soaring, many of those big institutions have stopped making warehouse loans or have cut back on that business.”
Read the full article “Mortgage Banks Push for Federal Support“. I for one am glad to see this “sleeper” issue is being brought to light. More commentary coming soon!
