According to inside sources, warehouse lender First Collateral Services has stopped accepting new clients.
The company, which provides credit lines to smaller mortgage lenders so they can fund the mortgage loans they originate before selling them on the secondary market, has apparently ceased accepting new business.
A company e-mail said, ”Our decisions are based on our continued evaluation of the current and evolving market environment…”
First Collateral is the fifth largest warehouse lender, with $4 billion in commitments as of March 31, according to National Mortgage News estimates.
The move comes after Citigroup’s purchase of ACC Capital Holdings wholesale unit and servicing portfolio.
The decision to cut new warehouse lending will make it increasingly difficult for smaller lenders to survive, a move that could strengthen Citigroup’s position in the future.
Many of the lenders that have ceased operations in the last year and change did so after being cut off from their warehouse lines of credit.
Former subprime giant New Century Financial Corp. filed for bankruptcy in April after warehouse lenders cut off its credit line.
No formal announcement has been made by First Collateral regarding the news, but sources said the unit will continue to lend to existing clients.