Chase Changes Its Mind, Will Stay in Warehouse
National Mortgage News (05/11/09) Vol. 33, No. 32, P. 1; Muolo, Paul
“JPMorgan Chase has decided not to exit the warehouse lending business after all but now will provide lines of credit only to certain customers that sell loans to it on a correspondent basis. The firm in 2008 purchased the warehouse business of Washington Mutual, which had just 10 customers left when JPMorgan Chase announced plans to pull out of the niche. A company spokesperson said it now will serve only a subset of these 10 customers.”
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WAREHOUSE LENDING UPDATE:
Chase correspondents must have began to notice that delivery was destined to suffer as independent mortgage brokers lost more and more warehouse capacity. If mortgage bankers don’t have the funds to disburse loans, it makes it really hard to sell to correspondent investors. Those correspondent executives must be putting pressure on their commercial lending divisions to at least extend funds to their “best” clients…
As a trend, several larger lenders are deciding to “remain” in warehouse lending by offering lines of credit to their largest correspondent lenders – with some pretty hefty restrictions on where those loans can be delivered. Every time one of these companies sends out a press release –hundreds of mortgage bankers pick up their phone hoping for relief… but they are not offering warehouse lending to the market at large. Wachovia, GMAC/RESCAP, and Chase (and a few others) are taking care of long-standing customers that deliver volume to their correspondent channel. I even received an email forward indicating that only companies with a correspondent Senior VP level recommendation would even be considered as an applicant. Perhaps in the “bigs” jockeying for market share, they will start to incent loyalty… however, it is my understanding that today they know they have their clients “over a barrel” changing conditions, terms and restrictions on lines with little notice. Many bankers remain insecure about their line and how to price with net worth, cash reserves, haircuts a moving target. While by necessity many bankers are grateful for any capacity… you can sense that those bankers remaining in the market, ones that have proven their worth as businessmen and women, are becoming disenchanted with expectation that they genuflect to their business partner and pay homage to their generosity.
For lenders that don’t have long standing correspondent relationship with one of the big lenders, well… you still have a few options. First Tennessee – under the stewardship of a very conservative Bob Garrett (say what you want about his iron fist on approvals – but they didn’t miss a beat during this meltdown – and I am sure his current clientele is very grateful)… Comerica – whose net worth requirements increase on a weekly basis in response to swelling demand – I think they are now looking at a $5mm minimum net worth. Sovereign – who I heard came out this week and know little about… Gateway Bank – with a sizable non-refundable app fee and some pretty directed back end requirements… Silvergate – don’t call them unless you are a local CA banker… Tier One… another I don’t know about but have heard conflicting reports about their taking applications.
Titan is in negotiations with a few regional banks that are interested in offering warehouse lines. While some will be national, most are just looking to shore up one of their customers, and we are managing the line for them. This means that things will start to ease… however, I believe that we are not going to see a fair normalization until at least next year. My best advice to anyone looking for capacity – be creative… think short term survival…