Countrywide Credit Industries arranging a $3 billion line of credit to support its booming mortgage business, market sources said.
If the credit goes through as planned, it would be the largest ever made to a mortgage bank. The facility, led by First Chicago Corp., would replace a $1.76 billion line put into place last year by First Chicago. That deal is the current record holder.
Credit Lines Swell
First Chicago is now rounding up a syndicate of lenders to provide the new line, the sources said. Prospective lenders are expected to respond by Oct. 14.
Huge lines of credits are become increasingly common in mortgage banking as the industry consolidates.
Earlier this year, Prudential Home Mortgage Co. obtained a $ 1.1 billion bank line, its first ever. And Fleet Mortgage Group renewed a $1.75 billion facility.
Countrywide, the nation's largest home mortgage lender, is expected to produce nearly $50 billion of mortgages in the fiscal year that ends in February. That would be up more than 50% from the preceding year.
Just two years ago, the company was operating with a credit line of $800 million.
Officials at Countrywide and First Chicago declined to comment on the pending deal.
But market sources said credit would be used primarily as a "warehouse" facility and to back the issuance of commercial paper. Mortgage warehouse lines are used to fund mortgages awaiting sale into the secondary market.
Though specialists concur that Countrywide is a desirable name in the bank loan market, the deal's very size raises some issues.
"Even for Countrywide it is a lot of money to raise," said one banker.
Lending to mortgage banks has traditionally been the province of a small group of lenders, but their numbers have expanded greatly. Banks likely to play a role in the Countrywide facility include Bank of New York, Chase Manhattan Bank, NationsBank, ABN Amro Bank, Bank of America, and Bankers Trust, all of which are co-agents for last year's deal.
The proposed credit will be structured as two revolving credits totaling $3 billion. One revolver be $1 billion and have a 364-day maturity while the other will total $2 billion and run for two years, sources said.