HomeBanc Mortgage Corp., which recently bought itself back from First Tennessee National Corp., has secured a crucial type of financing for any independent mortgage bank: a warehouse line.
The Atlanta company got a $225 million line of credit from GMAC-Residential Funding Corp., a unit of General Motors, and First Union Corp. The line will be used to finance home mortgages held for sale into the secondary market.
The warehouse line was split 50/50 between the two lenders. GMAC-Residential Funding of Minneapolis is the collateral and credit agent. Its lawyers drafted the documents, and it will handle the collateral and monitor compliance with loan covenants.
GMAC and First Union do not plan to syndicate the line right away. "It will probably be syndicated later this year or next year," said Carolyn Eskridge, a senior vice president at First Union.
"The syndication market is tough today," said Larry Pendleton, the managing director of warehouse lending at GMAC. "We've had several of the major warehouse lenders drop out" of the business."
For two lenders to be willing to each take on $112.5 million is "a big commitment," Mr. Pendleton said. But GMAC took comfort in HomeBanc's reputation as the leading mortgage lender in Atlanta, and the fact that it mostly originates plain-vanilla conventional mortgages.
Not bothering with syndication enabled GMAC and First Union to close the deal in just five weeks; usually a warehouse line takes at least three months to complete, Mr. Pendleton said. The warehouse line closed on April 28, the same day HomeBanc management completed its buyout.