Warehouse line relief is coming in small waves, but only for the big banks, despite the fact that small and community banks (as we have consistently been pointing out) are the most stable, have greater trust from their customers and would benefit the most from a solution to the warehouse liquidity crisis!
Read our recent article in Mortgage Orb: “REQUIRED READING: How Independent Mortgage Bankers Can Survive The Warehouse Crisis“
Restoring the productivity of the U.S. mortgage marketplace is a critical, perhaps linchpin, element of both domestic and global economic recovery.Despite conditions ripe for our industry to experience resurgent and restorative volume, independent mortgage bankers have been restrained by a massive retreat from warehouse-line lending. (More)
Despite recent lobbying efforts and legislation, changes thus far have done nothing more than bolster the big banks whose stability has been questionable for some time. ”Big Bank” lenders saved by Troubled Asset Relief Program (TARP) allocations are gaining market share, which poses a dangerous imbalance to our recovery and long-term financial sustainability. From the MBA:
MBA Keeps Up Pressure on Warehouse Lending
Sorohan, Mike
More than 90 percent of warehouse lending capacity has disappeared in the past few years–an issue the Mortgage Bankers Association has made a priority in communication with policymakers and legislators.
Last week, MBA stepped up those efforts on two fronts. On Aug. 27, MBA and the Warehouse Lending Project, a coalition of independent mortgage bankers, met with Treasury Department officials to discuss how Fannie Mae, Freddie Mac and Ginnie Mae could help jumpstart warehouse lending activity.
Additionally, MBA last week coordinated with 17 state mortgage lending associations in a letter to the Senate, asking for their support in creating a solution that would open up warehouse lending channels.
The activity comes at a time when warehouse lending activity remains stagnant. Warehouse lending is a short-term revolving line of credit provided to a mortgage company to fund mortgages from the closing table to sale in the secondary market. It is the mechanism by which virtually all non-depository mortgage bankers fund loans that are eventually sold into the secondary market to Fannie Mae, Freddie Mac and Ginnie Mae. Today, loans originated through warehouse lines are responsible for at least 25 percent and as much as 40 percent of all residential mortgages, including more than half of all Federal Housing Administration loans.
MBA estimates that the number of active warehouse lenders declined from a peak of more than 115 in 2005, to fewer than 30 today?The total aggregate capacity of warehouse lending credit has declined to about $25 billion, down nearly 90 percent from the level reported in 2007. (more)
Here is more recent mortgage industry news concerning warehouse line lending which outlines the problems for smaller banks:
NATIONAL MORTGAGE NEWS: September 21, 2009Warehouse Squeeze Eases—but Only for Bigger Players
Banks are becoming somewhat more willing to provide warehouse lines to larger and medium-sized players, but it remains difficult to say when and if lines will be again be available for “mom and pop” mortgage brokers and other small originators that are among those hardest-pressed by regulation and the downturn.
For relatively small players, the warehouse lending situation has “gotten worse, not better,” according to Scott Stern, CEO of Lenders One, St. Louis, a cooperative aimed at giving its members the collective scale they need to compete in the market effectively.
As a result of this situation, brokers’ and smaller players’ main career alternatives on the origination side of the business in the near term may continue to be either collectives that aim to preserve their autonomy while supporting and sharing in the profits from their efforts (sometimes referred to as “branching” operations) or joining a lender’s staff.
Warehouse line availability today is “driven by net worth and line size,” Mr Stern said. “Unless you need a $100 million line and have a $10 million net worth, [warehouse lines] are getting harder and harder to find.” (more)
Small banks fail in big numbers
Left behind in finance revival
The Washington Times
By Patrice Hill
While attention has focused on the improving fortunes of the nation’s largest banks and Wall Street firms, an increasing number of smaller banks have succumbed each week to a slow tidal wave of defaults on consumer and business loans. (more)
More updates soon…
