Nearing A Point Of Inflection

The warehouse lending business has gone through a number of cycles over the years, from extreme tightness in granting credit to being overly loose. The past couple of years saw it once again being very tight on granting credit, and given what was happening in the mortgage marketplace, understandably so.

At the recent Mortgage Bankers Association's National Secondary Market Conference, the panelists during the warehouse lending session all repeated the same, obvious, mantra-they only want to lend to those who are able to repay them.

Fear of not getting their money back is what has led warehouse lenders in the past to pull back from providing funds to originate certain loan products. The 1998 subprime lending crisis was triggered by warehouse providers skittish over the impact the Russian loan situation would have on Wall Street investors in nonconforming mortgage loans.

We are still seeing negative news in the warehousing business, starting with the Taylor Bean & Whitaker/Colonial Bank fiasco and more recently, the actions of PNC.

Yet in a ray of hope for the business, BB&T has kept a fair portion of the Colonial business going. And there are regional and community banks seeing a profit-making opportunity in warehousing and jumping in.