Mortgage Industry News

Wow, I am starting to have de ja vu.

All of the things we have been saying about the current warehouse lending crisis and actionable solutions to the problem keep popping up in the industry press. But I am glad that our message about the liquidity crisis and the need for a national warehouse line solution are getting out there, and in a big way.

We had several meetings in Washington last week and were pleased at how receptive and enthusiastic legislators were to hear what we had to say, learn more about the problems and work to develop real, applicable solutions. Updates on those meetings and our plans coming soon. In the mean time, here is a snippet from the MBA’s commentary on the current warehouse lending situation, cited from this week’s MortgageOrb/Secondary Marketing Executive:

“Just when one might think the current crisis facing mortgage banking cannot get any worse, along come the problems facing the warehouse lending sector. At the recent Mortgage Bankers Association (MBA) National Secondary Market Conference, the perilous state of warehouse lending and the possible solutions were discussed.     

“Michael Carrier, associate vice president for secondary markets at the MBA, argued that the warehouse lending dilemma will create additional problems for independent mortgage banks struggling to stay afloat.

“There is a perfect storm for non-depositories that rely on warehouse lenders for their funding,” he said. “We have consolidation in the industry, so there are fewer and fewer players out there. We have existing warehouse lenders terminating their business because they are about to reduce risk and reduce costs, and the ones keeping the lines open are putting more restrictions on it and making it more and more difficult to obtain lines of credit.” 

“Carrier blamed the overall state of mortgage banking as having a damaging effect on the warehouse sector. “The reason many people say they are getting out of the business is because anything associated with a mortgage is a four-letter word,” he continued. “The risk-based capital charge associated with a warehouse line is so much higher than mortgages, so it is easier to clean up your balance sheet by getting rid of warehouse lines. But that’s not much comfort for the thousand or so non-depository independent mortgage bankers that rely on warehouse.” 

“Carrier pointed out that the situation will limit attempts to revitalize both the industry and the overall housing market. “About 25 percent to 40 percent of all originations come from independent mortgage bankers, and 55 percent of Federal Housing Administration originations from these sources,” he added. “With fewer originations now, there is higher volume for commercial banks, so they are raising their rates and fees in order to slow down volume. That is not helping consumers.”  

“MBA has gone on road shows to various financial regulators,” he explained. “We started with the [Federal Deposit Insurance Corp.] (FDIC) and met with Chairwoman Sheila Bair. We said that they issued a financial institution letter that said, ‘Don’t stop lending to creditworthy borrowers.’ We then said that warehouse lenders are creditworthy borrowers – so why doesn’t the FDIC issue an updated financial institution letter that emphasizes warehouse lending? She expressed absolutely no interest in this, pointed a finger and said, ‘Why don’t you talk to the other banking regulators?’  

We have several exciting prospects in the works, and are actively discussing new legislative initiatives with Washington lawmakers. We are working to show them both how current legislative initiatives are addressing problems that no longer exist, and to also turn their focus to the critical issues that need to be addressed now to move the mortgage and housing industries back to a place of strength, health and quality. We will keep publishing details as we move forward. Stay tuned!