You Want a Warehouse Line of Credit? Not So Fast

April 22, 2009 No Comments »


In recent weeks, there have been signs that warehouse lending has been opening up again, the type of financing that allows smaller, independent mortgage bankers to fund their own loans and stay in the game.

Recently, Wells Fargo said it was getting back into warehouse lending, and ResCap is expanding its presence as well, but who is actually set to benefit from these moves?

At this point, anyone can originate large volumes of loans thanks to the record low mortgage rates on offer and the subsequent refinance bonanza that has developed.

But what happens after the low rates become a thing of the past and everyone has refinanced?

Unfortunately, executives of these warehouse lending units have caught on, and don’t seem interesting in lending to those looking to get warehouse credit just so they can be a part of this refinance wave.

Apparently originators have been trying to convince warehouse lending executives that they’ll see explosive growth if given the credit line they need to get the loans funded, according to a report from

“I don’t want to hear that right now,” said Ken Logan, director, residential mortgage and consumer group, Wachovia Securities, at the Mortgage Bankers Association’s National Secondary Market Conference in Chicago.

“The refi boom is eventually going to end. What’s going to happen to them at that point?”

He noted that those most likely to get a piece of the new warehouse lending business already have strong pre-existing balance sheets and business relationships, so newcomers and those struggling may be forced out of the business unless the MBA somehow saves warehouse lending.

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