A California-based institution has shut down its wholesale lending unit and will instead focus on its correspondent lending business and thriving warehouse operation.
Gateway Bank FSB has suspended all wholesale lending, according to an Oct. 15 message posted on its Web site.
The San Francisco-based federal savings bank noted that last Tuesday was the last day to submit wholesale loan packages. Conditions on loans-in-process must be received by Nov. 10, and all loans must close by Nov. 15.
"It's basically having to do with yield and volume," Gateway Senior Vice President Mark Sussman told MortgageDaily.com in an interview. "Everyone is being squeezed so tight now."
Sussman noted that the economics of the wholesale business didn't make sense once originations dropped below $50 million a month. While the company had dealt with several thousand mortgage brokers at its peak, it was only dealing with 350 recently.
Five account executives were laid off as a result of the closing, but operational employees were shifted to correspondent and warehouse lending.
Despite the decline in wholesale performance, the company's correspondent lending operation is doing well as a result of its thriving warehouse lending business.
"We're one of the largest small warehouse lenders in the country," Sussman stated. "As First Collateral and IndyMac and Impac and Countrywide and Warehouse One and a bunch of other warehouse lenders disappeared ... our volume went through the roof."
He said the typical warehouse lending customer has a net worth of between $1 million and $5 million -- with an average of $1.3 million.
The executive explained that their warehouses lines, which are available to finance conventional and FHA loans nationally, are not restrictive and can be used to fund loans that will be sold to other nationally recognized lenders approved by Gateway.
The line is priced at between 1 percent to 2 percent over prime, transaction fees range from $75 to $150 and the haircut is 0 to 2 percent on first mortgages and 1 percent to 5 percent on seconds.