Lender Impac Mortgage Holdings is the latest firm to shake up its offerings by announcing plans to re-enter the residential warehouse lending business through a new division, Impac Warehouse Lending.
The firm is now accepting applications and plans to finance conforming loans alongside jumbo loans valued up to $3 million.
Not to mention, high LTV HARP products with loan-to-value ratios as high as 150%.
Through this strategy, Impac will be able to provide more funding to lenders. The firm plans to initially focus on mortgage bankers and credit unions.
By moving into this space, Impac will be able to add value for current correspondent customers, the company said Monday.
Bill Ashmore, president of Impac Mortgage, says the firm previously had experience on the warehouse side of the business before exiting the space. Now it's back and ready to work in the changing mortgage environment.
When the lender entered the correspondent lending space over a year ago, it already had plans for the eventual launch of a warehouse unit, given the unique synergy between the two.
Another consideration, says Ashmore, was the “changing regulatory environment.”
“We think more brokers are interested in applying and getting a warehouse line … and actually becoming a banker," he explained.
Ashmore said the firm is interested in establishing a mini-correspondent line for smaller players interested in securing a warehouse line.
Impac is not alone in trying to find new ways to stay competitive in today's environment.
It’s a changing landscape, and Andrew Weiss-Malik, chief operating officer at 360 Mortgage Group, is familiar with some of the strategies lenders are pursuing to stay ahead of the curve. In February 2012, his own firm went in a different direction, launching a correspondent division.
So why are lenders shifting into new spaces? The simple answer: it takes effort to stay competitive in a changing marketplace.
"We really did it as a forward-looking move," Weiss-Malik said. "Where is the market going to be – that is where we wanted to be."
Weiss-Malik says there’s already one trend taking place. "It seems like anybody who was in wholesale is now opening up a correspondent platform. They are scrambling to shore up more volume – we have all of this capacity that is not being used by our retail and wholesale groups," he explained.
Yet, transitioning is not easy, especially if you are moving into correspondent lending.
"Correspondent (lending) is not easy,” Weiss-Malik explained. “You have to purchase quickly. We see players getting in, and they are not mature enough or buying fast enough.”
They also lack the systems and processes, including the technology, to keep it all in check, he said.
Still, other business lines – especially correspondent divisions – bring tangible benefits as refi volumes cool and rising mortgage rates challenge lenders.
Correspondent lending, for example, has an easier compliance component. “We see correspondent as a real opportunity,” said Weiss-Malik, a year after pursuing this type of platform. “I think it’s a great way to get additional volume.”
Correspondent lending may be easier from an operations perspective, but it took Impaq over a year to iron out all of the kinks in the system.
“It may seem the seller is responsible for all of the compliance, and this is not necessarily true,” he explained. Lenders branching off are advised to ensure all loans in the system remain compliant no matter what, otherwise the housing agencies will at some point come back to you with a put-back request, Weiss-Malik advised.
Yet, Impac and 360 Mortgage painted both of the firms' moves as strategic and essential as the market experiences rapid shifts.