MBA Formally Asks for Capital Cut on Warehouse Lines

The Mortgage Bankers Association has asked federal banking regulators to cut the capital requirement on warehouse lines of credit by as much as 80% to alleviate a funding crisis facing non-depositories. Currently, depending on what stage of funding a loan is in, the risk weighting on a warehouse loan can be as high as 100%. This means $8 in capital must be held for every $100 in warehouse credit outstanding. For Fannie Mae, Freddie Mae, Federal Housing Administration and Veterans Affairs loans the trade group wants the capital charge to be 20%. Non-bank mortgage lenders are seeing their lines disappear or reduced with several regional banks exiting the warehouse sector as a way to preserve capital. MBA's letter was sent to the Office of the Comptroller of the Currency, the Federal Reserve, the Federal Deposit Insurance Corp. and the Office of Thrift Supervision.