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Warehouse Credit Availability Expands in 2015: Reynolds

Warehouse lenders dramatically expanded the amount of credit they were willing to extend in 2015, accommodating a noted increase in originator demand, according to The Reynolds Group's annual warehouse lending survey.

The total available facility level covering the 78 lenders in the survey spiked to $105 billion. In 2013 and 2014, the figure stood at $83 billion for 72 lenders and $87 billion covering 77 lenders, respectively.

"As we were completing this year's survey, it became apparent that 2015 was going to be considered a very good year for many of the participating warehouse lenders," James Reynolds III, managing partner of The Reynolds Group, said in the survey's overview.

"Despite the rising costs associated with compliance and regulatory issues — i.e., the cost of doing business in today's residential mortgage industry — the warehouse lenders' mortgage banking clients, for the most part, were experiencing relatively strong production and economic performance levels," he added.

The survey found that the average turn time — the time between the funds were advanced and then repaid after the loan was sold — came in at the 19-day range, which was longer than in the 14- to 17-day range seen for 2013 and 2014.

This reflects "investor take-out delays resulting from [TILA-RESPA integrated disclosures] compliance issues/challenges/confusion," according to the survey, which also noted that "it is anticipated these turn times will remain high for at least the first quarter of 2016 and possibly longer."

Outstandings, which reflect the amount actually borrowed, averaged $54 billion, higher than the figures of $43 billion and $39 billion recorded in 2013 and 2014, respectively. The usage level was roughly 51% in 2015, which was higher than the 38% seen the previous year but below the 52% level calculated in 2013, according to the survey.

Altogether, Reynolds calculated that the total annualized warehouse fundings added up to roughly $1.03 trillion. That figure took into account higher overlaps from distribution factors like participations and syndications than in previous years, which the survey attempts to net out.

This level of annualized fundings is the highest seen since 2006 and approached the level of fundings reported back in 2003. For comparison, annualized warehouse fundings totaled approximately $905 billion in 2014.

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