Warehouse credit for nonbank borrowers is probably the most plentiful it's been since the financial markets crashed three years ago, as banks large and small have waded into the sector.
But there's just one little problem: independent mortgage banking firms aren't as thirsty as they used to be.
"Our commitment level is at about $800 million," said Jerry Davis, manager of warehouse lending at ViewPoint Bank, "but our average outstandings are down by about 30%."
Nonbank mortgage firms still want — and need — credit but are opting for shorter-term loan facilities, which translates into lower profits for the banks extending the lines.
However, this shouldn't be taken as a sign that warehouse lending is about to enter another period of upheaval.
"This is still a great business to be in," said Larry Charbonneau, managing director of Charbonneau & Associates, an advisory firm.
"We are seeing the best collateral we've seen in 30 years," he said.
Among other things, Charbonneau estimates that at least six banks have entered the business since the fourth quarter, including MetLife Bank, People's United Bank and Republic Bank and Trust.
"And there's still new banks looking to get in," he said. "I talked to two this week."
According to figures compiled by National Mortgage News, commitment volumes fell by about 6% in the first quarter from the previous quarter to $33.9 billion.
Then again, a "commitment" to lend is just that. Warehouse providers earn fees on open lines of credit, but the real money comes when those commitments are drawn upon and left open.
"Last year usage at our shop was at 55%," said Davis. "Right now it's at 35%."
Bank of America Corp. and Wells Fargo & Co. lead the industry in terms of commitment levels at March 31, by National Mortgage News's estimates.
B of A and Wells, traditionally, have linked commitments to their correspondent purchases.
Their model generally involves extending lines of credit to nonbanks with the stipulation that an originator receiving a short-term loan from them must then sell the product to them as well.
Most of the new entrants to the business — the community banks, especially — don't use that model, but require the nonbank funders to be located in the bank's retail footprint.
Then again, this requirement is loosening as well, a sign that competition for customers may soon grow even fiercer.
