Survey: Basel III Could Affect Significant Amount of Warehouse Lenders

New Basel III provisions could impact a significant percentage of warehouse lenders, the Reynolds Group’s recently released annual survey suggests.

The survey shows the new 8% reserve level required for residential mortgages held as collateral by warehouse lenders would impact between 35% and 50% of the 72 respondents in the survey who have been using the lower 4% reserve level that has been used for residential mortgages.

“Another area that is likely to have a significant impact on close to 50% of the…warehouse lenders survey, who utilize the purchase and sale agreement funding structure, is the final legal/accounting resolution of the loan-to-one borrower issue that is currently being reviewed by regulators.

“The PSA structure, which has been operating efficiently, without significant exceptions for over 40 years, is utilized primarily by small community banks throughout the country,” noted James E. Reynolds III, managing partner, the Reynolds Group, in the survey report.

He said he found in the survey that many respondents “were hopeful that a workable solution would be attainable in the near future.”