Mortgage Industry News

(Continued from a previous post here)

Resourceful and creative independent mortgage bankers have already discovered the option of establishing a warehouse line through private equity. GMI Home Loans (gmihomeloans.com), a New Jersey retail mortgage banker originating approximately $500 million per annum in conventional, FHA and reverse mortgages, encountered liquidity challenges soon after its launch in 2007 when access to warehouse line facilities began shrinking industry wide. GMI reached out to NVC Premier Fund LLC, an entity managed by New Vision Capital Partners, LLC, for its funds, and worked with Titan Lenders Corp to develop a warehouse line process management platform.

“As a matter of necessity, we went outside the box to secure reliable liquidity for our business, and found a private equity source to fund our warehouse line,” said GMI Home Loans founder and President Glen Lemeshev. “Making it work for our correspondent investors required that we secure a third-party administrator and custodian, and put into place processes and safeguards that ensure our loans are accepted for purchase by them.”

Private equity funds can fill the gap between loan origination and ultimate investor with minimum start up and operating costs by outsourcing the technology infrastructure and process management. They can pilot programs on a smaller scale, taking their capital to market in a highly structured, process-driven environment. When these processes are refined and perfected, funds can scale up, down, regionally, nationally, conforming or niche.

Due to its use of the Titan Lenders Corp warehouse lending management platform, all costs are variable with the exception of the wire transfer fee, which is fronted by NVC when wires are sent to settlement agent for funding.  Nonetheless, all fees are covered by or recovered from the lender when the investor purchases the loan.  Upon receipt of purchase advice, NVC withholds per diem interest (cost of funds) and administrative fee to cover services and out of pocket costs (wire fee) prior to turning over remaining funds to lender.  This deal truly costs NVC next to nothing to execute and run.

Part five tomorrow…