The recent reports of Wells Fargo & Co.'s (WFC) plan to return to warehouse lending is prompting other lenders to reconsider a return to the lending space. The mortgage-lending business operating within recently bailed-out GMAC LLC, called Residential Capital LLC (ResCap), said Thursday its growing business relies on the warehouse lending industry.
Correspondent lenders originate two-thirds of ResCap's mortgages, meaning GMAC's mortgage business relies heavily on warehouse facilities, according to CEO Thomas Marano. The company hired Bank of America Corp. (BAC) veteran Adam Glassner several weeks ago to head ResCap's warehouse business, to which Marano did not assign a dollar amount in a Thursday interview with Bloomberg News. “What we’re able to do is provide funding to the midsize mortgage banks out there to reach more consumers and give them a more competitive price,” Marano said, according to Bloomberg. “We’re looking to do it in a meaningful way."
The announcement comes as smaller, independent lenders are finding their warehouse lines shrinking — or disappearing altogether. The influx of interest in refinance has put pressure on independent mortgage bankers’ resources to the point that loans are taking weeks longer to close and, in some cases, are being turned away due to a lack of funding from a shrinking number of warehouse lenders, HousingWire’s sources say.
Available warehouse credit lingers at a volume 85% lower than 12 months ago, to just $20bn to $25bn, the Mortgage Bankers Association reported in late March. Various industry sources warned as early as December that recent swells in refinance activity pressured diminished warehouse facilities, raising questions whether correspondent lenders hold enough warehouse credit to close all the loans in their pipelines.
The early April reports that Wells may launch a $4bn warehouse lending unit mark a possible turnaround from major lenders that are beginning to toe the line back into warehouse territory. If history lessons hold true, other large lenders may soon follow suit. HW's sources confirmed at least one Dallas-based servicer plans to follow Wells and GMAC into the warehouse space.
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Disclosure: The author held no relevant investment positions when this story was published. Indirect holdings may exist via mutual fund investments.