CHICAGO -- Hamilton, Carter, Smith Consulting and First Financial Services have formed a joint venture to assist mortgage banks in seeking warehouse financing.
The venture will also provide consulting services for institutions seeking to enter the warehouse lending arena. Warehouse loans are used by mortgage banks to fund mortgages awaiting sale into the secondary market.
The tremendous growth in mortgage banking in recent years has strained existing sources of warehouse financing, making it difficult for some small to medium-size lenders to obtain financing.
Warehouse lending has become a lender's market, a situation that Chicago-based Hamilton, Carter, Smith and First Financial of Oakland, Calif., wish to exploit.
Mortgage banks seeking funding will be given access to a database of lenders that includes information on their lending criteria. Mortgage banks will be able to match their operating profile with the lending criteria of lenders, according to Bob Horner, chief executive officer of Hamilton, Carter, Smith Consulting.
"We help mortgage banks make the appropriate connection," said Mr. Horner, the former chief executive of Citicorp Mortgage.
Clients will be assisted in preparing a credit package as well as in negotiating terms and conditions of the warehouse line.
|Real Lack of Lenders'
The venture's managers believe many clients will be medium-size mortgage banks that originate $20 million to $30 million a month, according to John Hurst, president of First Financial. "There is a real lack of lenders in the $5 million to $12 million range," he said.
Warehouse lines of this size don't interest most large commercial banks but are too big for many of the smaller regional banks, which provide lines of $2 million to $3 million, according to Mr. Hurst.
Larger mortgage banks, especially those operated by thrifts, are also part of the venture's target client base. Many thrifts have seen their volume of mortgage origination business grow beyond their funding base, according to Mr. Hurst.
"We want to advise these institutions about their funding options, such as commercial paper and repurchase agreements," said Mr. Hurst.
The flip side of the joint venture is advising lenders of warehouse credit. Hamilton, Carter, Smith and First Financial hope to attract lenders new to the market as well as advise those with ongoing warehouse lending programs.
Services include assistance in evaluating credit review procedures with an eye toward establishing a standardized customer rating system.
The venture is also positioning itself as a provider of due diligence services for mortgage warehouse lenders.
Those involved hope to provide a cost-effective way for smaller lenders to obtain operational evaluations. "People have generally come to believe that you have to go on-site and kick the tires," said Mr. Hurst.