Today, loan terms aren't a whole lot better but mortgage bankers are resting a bit easier for two main reasons: more banks are entering the sector, and commitment volumes are on the rise. Also, some banks are willing to finance broker-sourced loans.
According to figures compiled by National Mortgage News, warehouse commitment volumes rose to $31 billion at the end of March, a 20% increase over the same period a year ago. (In calculating its numbers, National Mortgage News assumes it has captured 70% of the market.)
Bank of America is the presumed market leader with $15 billion worth of commitments at March 31 but the lender declined to confirm-or deny-the figure, which is based on comments made by a B of A warehouse official at a Texas Mortgage Bankers Association meeting this spring.
But it's no secret that B of A is a leading correspondent buyer of mortgages and offers warehouse lines to nonbanks that sell to the firm. In fact, most top correspondent buyers of mortgages-B of A, Wells Fargo & Co. and JPMorgan Chase-offer some type of warehouse program but none will talk about their programs publicly.
According to advisors like Michele Perrin and Larry Charbonneau, more community banks are eyeing the warehouse market because the profit margins are strong. Late last week Associated Bank of Wisconsin made the decision to expand out its regional-only warehouse program into a national one. "They want to grow this effort significantly," said Charbonneau.
Meanwhile, Perrin is working with a new warehouse lender that wants to commit $1.8 billion to the business this year. She declined to name the bank, which is a client of hers but called the effort "great news for mortgage bankers everywhere."
Although there are strong signs of new activity in the warehouse arena, not all the news is good. PNC Financial Services is putting the finishing touches on winding down the warehouse business of National City, a bank it acquired 18 months ago. PNC also pulled the plug on Red Capital Group's warehouse business late last year.
(A few weeks ago the bank sold Red Capital to Orix USA, a financial service provider whose ultimate parent company is based in Japan.)
But there is a tinge of irony in all the new warehouse activity: it comes at a time when overall origination volumes are declining in the primary market which means the need for warehouse credit should be falling.
"The good news is that warehouse capacity is starting to meet the needs of nonbanks," said Perrin. "But it's coming at a time when I'm starting to hear stories of firms saying they're 'overbanked.' Still, it's good to see new entrants getting into the business."
