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Mortgage portfolio trades and forward commitments. Correspondent lending, r e p u r c h a s e s and warehouse news. Secondary marketing statistics and lawsuits.

Warehouse Lines a Big Factor in Production

Inadequate capital often a problem

Jan. 8, 2013

By Mortgage Daily staff

Achieving multi-billion dollar annual mortgage production involves a number of factors not least of which is the ability to obtain an adequate warehouse line of credit.

An increasing number of large aggregators are retreating from correspondent lending purchases, frustrating many players in the process.

But there is some opportunity that lurks in the new world of mortgage banking.

That's according to a client newsletter from The Business Loan Connection, a Michigan firm that connects mortgage bankers to warehouse lenders, alliance partners and capital.

"Many small and medium-sized mortgage bankers who issue securities are now able to buy from other mortgage bankers who had traditionally sold to mortgage lending's 'big boys,'" the newsletter states. "The prospect of doing hundreds of millions of dollars per month is more than a dream with these companies -- it is a reality."

Whether or not optimistic production goals are achieved depends on a number of factors.

Reaching high production levels is impacted by the lender's back-room capacity.

It also requires sufficient financing for loan production.

Successful mortgage bankers need adequate warehouse lines to accommodate increased originations, but achieving takeout investor status is by far the most difficult part of the process.

While warehouse lenders can sometimes require a net worth in excess of $50 million, emerging lending entities come to the table with a net worth under $10 million.

"This presents a problem as well as an impasse to the new breed of security-issuing mortgage bankers, who often can't get approved as a takeout by their potential client's mortgage warehouse providers," the Business Loan Connection noted.

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