Mortgage Industry News

The need for a national warehouse lending solution is growing, and the issue is gaining speed and momentum both within the industry and in the national media. (If you missed it, we outlined using a national warehouse line to solve the national liquidity issue here. This post is also a good background for anyone just becoming familiar with the issue).

The Wall Street Journal continued their coverage this week in an article by James R. Hagerty:

“Many of the small mortgage banks that remain are struggling. Mortgage banks, often small, family-owned companies, aren’t licensed to take deposits and so lack that source of money for their loans. Instead, they typically borrow money for short periods from so-called warehouse lenders. They use this short-term credit to make loans to their customers and then pay back the warehouse lenders after selling the loans to bigger banks or to government-backed mortgage investors Fannie Mae and Freddie Mac.
“But this warehouse credit is much harder to obtain than it was a year or two ago because many of the big banks and Wall Street firms that used to provide it have exited that business.”

Read the full article “Under 5%, Mortgages May Be Near The Bottom“. In a related story, credit union originations were up by 17% in 2008, according to numbers released by Inside Mortgage Publications:

“Credit Unions are significantly increasing their mortgage originations in the current economic meltdown and credit crisis. According to new numbers compiled by Inside Mortgage Finance, credit unions boosted their mortgage production by a healthy 17 percent during 2008. That growth came at the same time that overall mortgage originations fell 39 percent. The result was that the credit union share of total mortgage lending jumped from 2.5 percent in 2007 to a record-high 4.7 percent in 2008. Almost one quarter of last year’s credit union originations came from just five institutions – Navy Federal in Virginia, State Employees in North Carolina, Pentagon in Virginia, Boeing Employees in Washington, and Alaska USA in Alaska.”

This report demonstrates as we have pointed out that the current recession and declining consumer confidence in large banking institutions has created a great opportunity for credit unions and community banks to grow their customer base. As many reports have highlighted in recent weeks, despite the struggles of mammoth lending institutions, smaller banks, community banks and credit unions have not experienced the same issues because they did not engage in risky investments or other questionable practices.

Titan Lenders Corp President Mary Kladde was featured this week in an extensive article in the Credit Union Times, speaking as an expert resource concerning the current need for warehouse funding lines, warehouse funding options and strategies for credit unions, the current liquidity crisis, TARP funds and more.

In addition to giving a detailed overview of the current liquidity crisis and its causes, Kladde also provided insider perspective into how the current need for warehouse lending options is an advantage for credit unions:

 “For the warehouse lender, the lack of competition has created a market climate that is risk averse, which definitely works in credit unions’ favor,” Kladde said.

Warehouse lines of credit may be among the safest entries because of the 15 to 30 day turnaround, Kladde said. She touts backing from the Federal Housing Administration and Ginnie Mae and “tightened” underwriting guidelines as selling points. With banks getting TARP funds, there is discussion that Ginnie Mae may even insure the credit lines “and that may also be good for credit unions.”

Meanwhile, credit unions may be leery of venturing out because of takeout risks. Kladde said warehouse lenders, once permissive of aging loans, can no longer afford the risk of loans not purchased in a timely manner. Takeout risk can be managed in this market through due diligence with regards to compliance, fraud and quality loan production, she explained.

“Titan often requires its correspondent partners to employ its closing and post-closing services to mitigate takeout loss, ensure swift salability and leverage Titan’s reps and warrants,” Kladde said. “Should lenders refuse to purchase or fail to honor a commitment to purchase, Titan has a broad base of experience in quickly repackaging loans for sale within the current market or as ‘scratch and dent.’”

Read the full article: “Door Opens for CU Warehouse Lending“.

Titan has remained at the forefront of mortgage banking with our focus on the emergence of small community banks and credit unions.  In the post-megabank environment,  where banking had the same intimacy and charm of an airport terminal, we see a retrenchment of consumers seeking safety, reliability and personalized service.    This article outlines what we have been talking about for a long while…

“As U.S. banks retreat, credit unions step up loans”

“As the U.S. economy weakens and the country suffers its worst housing crisis since the Great Depression, big “money center” banks — after years of reckless lending before the housing bubble burst — have cut back drastically on loans.

But lending by credit unions is steadily rising. Credit unions are nonprofit cooperatives owned by their depositors, or “members.” Credit unions are as a rule much smaller than commercial banks, with average assets of $93 million in the United States in 2007 according to the Credit Union National Association (CUNA), compared to $1.53 billion for banks.

According to CUNA, there are more than 8,000 credit unions in the country.”

Read the full article: “As U.S. banks retreat, credit unions step up loans”