A Bloomberg report cites sources as saying Citigroup Inc. unit First Collateral Services is actively curtailing warehouse credit funding, including a decision not to take on any new warehouse credit agreements:
... [the] First Collateral Services unit won't accept new clients for "warehouse" credit lines ... First Collateral, based in Concord, California, still lends to existing customers, the people said. Citigroup's decision may make it harder for some home lenders to survive. More than 100 have sought buyers or halted operations since the start of 2006 as U.S. foreclosures climbed to a record in the second quarter. Loss of warehouse credit may have led to all of this year's 15 bankruptcy filings, said Ronald Greenspan, senior managing director for FTI Consulting Inc., a Baltimore-based firm that advises creditors.
The article also makes it clear that Citigroup isn't alone in its alleged decision:
Other warehouse lenders are refusing new clients, in part because it's "too difficult to determine the financial condition" of the companies, WarehouseOne President Gary Hoyer said in an interview. "I would think if you were out looking for a new warehouse line, you couldn't get it," said Brian Simon, a senior vice president at Freedom Mortgage Corp., a Mount Laurel, New Jersey- based mortgage bank. Some warehouse lenders have started telling clients "who they can or can't sell loans to," Simon said. Hoyer said he became wary after loan buyers didn't follow through on purchases -- sometimes because they've gone out of business -- sticking warehouse lenders with mortgages whose value as collateral may be less than expected.
I'm not surprised to see warehouse lenders get more choosy about who they will extend credit to, but I am surprised to see a lender of Citigroup's size and presence allegedly decide it is no longer interested in going after new business. Such a move, if true, would suggest that Citigroup's warehouse credit business has been hit hard enough by the current market turmoil that the company felt it made more sense to stay out the game altogether -- rather than just changing the the rules it wants to play by.