New mortgage banker asks about warehouse lines

Board Topic: Starting a lending Warehouse
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Starting a lending Warehouse

Posted by: Guest_Rick Mar 2 2004, 11:04 PM

Hello there, This question is might sound dumb, but exactly how would I start a Mortgage lending warhouse? What kind of collateral do I need? Is a warehouse insured by FDIC?

I've been in the Mortgage buisness for years, but this part has yet been exposed to me. And I would like to go to the next level in the buisness...warehouse lending.

Thanks

Posted by: loanuniverse Mar 3 2004, 12:08 PM
Rick:

If I understood your question correctly, you are a mortgage professional that want to be able to fund the loans that you originate and in order to do that, you need the temporary funding that a “warehouse line” provides. From that premise, let me see if I can answer your questions:

how would I start a Mortgage lending warehouse?
Getting this type of financing is somewhat difficult. First, not all banks give these types of loans. I can tell you that my present employer is the first bank that I have worked for that would do this type of loan. The reason is that this is very specialized and needs people knowledgeable to monitor the facility during its life. You should also know that the lenders that do these types of loans might have very tough requirements to qualify such as a high net worth, sufficient volume of business and a established track record in the industry. I can tell you that my employer is not interested in anymore of these loans at the moment.

I guess the first step to getting a warehouse line, you would need to find a bank willing to consider your request. Then it would be a matter of providing sufficient information for the lender to make a decision on the request. Because of the highly specialized nature of the credit, you would need to give not only your financial information, but also background information regarding your business operations. Off the top of my head, I can think of the following:

- Your resume and that of anyone else involved in the business.
- Are you approved by any of the big Gov. agencies? If so, they would probably want to see copies of those approvals.
- There is something called “Errors & Omissions/Fidelity Bond Coverage policy” Tehy would probably want to see a copy of this policy if you have it.
- Does your state require a license? If so provide a copy.

What kind of collateral do I need?
Well warehouse lending is the kind of loan where you will be transferring ownership of the notes that you originate to the warehouse lender. This means that the lender is protected. The problem for the lender is the period between the time that the loan is funded at the table and the time that they receive the documents at their location. This is called “wet funding”, or at least I think so… I have only done a couple of these facilities and the last one was about six months so I am rusty.

The type and amount of collateral if any, would depend on the lender guidelines.

Is a warehouse insured by FDIC?
The only insurable things in a bank are customer deposits. If you want to get a warehouse line you become a borrower not a depositor so there is nothing to insure.

Good luck, hope this helps

PS: If on the other hand, you want to become a warehouse lender instead of the borrower then it gets a lot more complicated cool.gif

Posted by: Guest_RICK Mar 3 2004, 06:01 PM
Thanks very much.....this does help a lot.
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