Mortgage Industry News

NexBank of Dallas’ launch of a $100 million mortgage warehouse lending division, offering lines of credit of up to $10 million to non-depositories, illustrates the evolving relationship between community banks and mortgage bankers (www.progressinlending.com/a-bit-of-tlc). Characteristic of a regulated institution, NexBank of Dallas warehouse lending guidelines are conservative, with lines of credit limited to mortgage bankers with a net worth of at least $1 million. Targeting NexBank mortgage brokers who are trying to become bankers, NexBank says it will consider lower net worth requirements on a firm by firm basis. TLC’s William Null (william.null@titanlenderscorp.com) is an expert on how community banks and mortgage bankers are collaborating in new ways.

by: Ruth Lee 

I am asked this question a lot.  And frankly, there are very few credible options for a small cap mortgage banker to find a non-captive line.   A bright spot in the market is GBC Funding in Atlanta, GA; and they have capacity!  I recommended a client to them three weeks ago – and he has been approved and is working on correspondent approvals.  That was a testament to his personal integrity and credit quality – but it is nice to have the option open again.

GBC Funding has innovated in a sector of the industry completely underserved – the emerging banker.  They do this through sound due diligence tempered with common sense credit underwriting.  The understand that a clean broker will be an even cleaner banker.    If using an outsource company like Titan, the risk is minimal for closing errors and omissions, compliance and regulatory issues.

As such, GBC targets the best of the best but their initial discussion does not start and stop with net worth.  They believe in relationships, long term relationships that are beneficial to both parties.  Emerging bankers are plentiful – but the warehouse lenders open to embracing their learning curve are not.  GBC offers a cross-investor line with competitive low volume pricing, very reasonable documentation requirements and up to 100% funding – no haircuts.   Our clients have huge success with GBC Funding as a partner.

Please visit our partners page for a direct link to GBC Funding.

Ruth Lee

Here comes the rain!!!  Even if its starting as a sprinkle.

In these past months, with rates not as aggressive and seasonal dips in refinance and home purchase demand, there has definitely been mellowing in transactional volume.  At the same time, there is not a day that  goes by that I don’t hear of another company that has been around for 15-20 years giving up the fight for survival and closing their doors.  In any case, all of these factors are freeing up capacity for warehouse lending in the small and mid-cap market.  We have been very pleased with the response we are getting from community banks and private equity groups opening small lines – however, at the end of the crisis, it will be the health of our traditional warehouse lending partners that will define this next chapter of housing recovery.

Today, I am hearing from a number of our warehouse lending partners that their capacity is loosening.  As such, we would encourage bankers looking for capacity to reach out to Southwest Securities – whom you can find on our partner’s page.  I know for a fact that Mark Cheney and Steve Wojnar with SWST are definitely looking for clients in their respective markets – Mark in the north FL and GA markets… Steve in the Northeast…  Southwest is a great company that really understands the market and hires accordingly.   David Frase, the man behind the curtain – well maybe a little out in front of the curtain – well okay, he is the master of ceremonies but who’s counting…well he is just a smart cookie with a strong sense of the market….  David has stewarded his program through the meltdown with foresight and agility.  A long term partner imo.

Ann Steadman with Texas Capital Bank (also on our partner’s page) sent out an email this week… she is also looking for clients in the southeast.  A fantastic southern lady… Ann is well-known for superlative customer service… with a smart, matter-of-fact understanding of warehouse lending.  As another Southern girl…I just love her style.   

While we aren’t ready for an ark…or even a bateau… the dehydrated market is going to soak this up like a sponge!  For all of you looking for a bit of relief… check out our partners page for contact information and best of luck!!!!

One of the “big boys” is finally coming to the table with the use of TARP funds for warehouse line lending!  As of the second quarter, Citigroup has supposedly set aside $2B for this initiative.  The big question of the moment is how quickly will they be able to “BRING IT”?

Relief is needed NOW, not 6-18 months from now:

“Citigroup approves $6B in new lending initiatives“

More signs of life related to warehouse line lending.  Distressed GMAC sees warehouse line lending as an opportunity. Again, the question remains IF and WHEN exactly?!

“Questions Arise as GMAC Looks to Expand Lending“

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…  

Warehouse Lenders – Active TAKING APPLICATIONS:

• COMERICA - minimum net worth of $5MM.  Very selective with little pull through.
• FIRST TENNESSEE- minimum net worth of $500K.  Very selective with little pull through.
• TIER ONE – relatively unknown.  No website.
• USBANK - Doesn’t advertise lines. Only goes for the “big” players with heavy delivery to USBANK
• GATEWAY BANK - Training Line with multiple investors
• FIRST FUNDING - Training Line with conduit directly into Flagstar
• WACHOVIA/WELLS FARGO - Just started taking applications.  Tentatively may become a larger provider.
• VIEW POINT - minimum net worth of $1M. 

CAPTIVE LINES:  Require a specific delivery percentage to their correspondent division.

• GMAC
• COUNTRYWIDE
• FLAGSTAR

NOT TAKING APPLICATIONS

• Natty Mac
• Colonial Bank - critical to the survival of Franklin American and Taylor Bean and Whitaker
• Texas Capital Bank
• Southwest Securities
• Town North Bank - very small player
• First Star Bank - small player out of TX

ADDITIONAL NOTES: Two more lines have emerged just in the last week.  Silvergate out of CA, which is focused on CA only for now, and ResCap. 

ResCap Expanding Warehouse & Jumbo, Bank deposit growth fueling expansion, April 17, 2009 (By MortgageDaily.com staff)

“Residential Capital LLC‘s warehouse unit has hired a new chief to oversee an expansion of the business. In addition, the lender plans to step up its jumbo offerings. A healthy pace of bank deposit growth will fund much of the expansion. 

“Two weeks ago, Adam Glassner was hired to run ResCap’s warehouse operations, Jeannine Bruin, a spokeswoman for parent GMAC Financial Services, told MortgageDaily.com in an interview today.

“Adam Glassner was brought on board because he has considerable professional experience in warehouse lending,” Bruin said. “He was brought on to lead our warehouse lending team, to expand that team and to oversee the expansion of volume.”

“The spokeswoman explained that demand for warehouse financing has increased as the number of players has diminished, creating “a really good opportunity.” In addition, the expansion supports the Obama administration’s policy of making mortgage credit available.”