In two years mortgage banking firms will need a minimum net worth of $2.5 million to be GSE seller/servicers, a mandate this is beginning to drive merger and acquisition activity.
“Right now we’re very busy,” said Chuck Klein, managing partner of Mortgage Banking Solutions, Woodway, Texas. “The [capital] minimum rises, but even if they’re at $2.5 million, it may not be enough.”
Klein said he has two merger deals ready to close, and two more in the works. He declined to name them because of confidentiality agreements. “We’re getting at least one phone call a day with people saying, ‘How can you help us?’”
He anticipates that over the next 12 to 24 months Mortgage Banking Solutions will be “darn active” but he also worries that with the GSEs and FHA requiring such a high net worth requirement “where will all the new mortgage banking firms come from? It’s a little frightening when you think about it.”
A handful of warehouse lenders will accept a minimum net worth of $1 million for a line of credit, but as the GSEs hike their requirements, so too might banks that lend to nondepositories.
Some warehouse lenders, such as JPMorgan Chase will only extend credit to mortgage firms with $10 million in net worth. (For the full analysis on this issue see the Monday paper edition of National Mortgage News.)
