The failure of Colonial Bank a few weeks ago, coupled with some high-profile departures among regulators and agency heads, could exacerbate the ongoing problems in warehouse lending.

Joe Murin stepped down as president of the Government National Mortgage Association last month, and James Lockhart resigned Monday as director of the Federal Housing Finance Agency. Both had been pushing hard for a warehouse solution involving government-backed loans.

"Losing Murin at Ginnie is a real loss for the warehouse issue," said Scott Stern, the chief executive officer of Lenders One, a St. Louis cooperative that represents about 100 nonbank lenders that depend on warehouse lines.

"And with Lockhart retiring it's another example of someone who is well versed on the warehouse issue leaving government. I'm very worried that we'll be starting over with both the regulators and the agencies."

Lenders One, the Mortgage Bankers Association and other industry representatives had brought several ideas to the agencies aimed at finding ways for Ginnie Mae, Fannie Mae and Freddie Mac to aid the warehouse sector, including purchasing participations in existing or new lines of credit.

Another concern for the sector is the impending departure of Treasury Deputy Assistant Secretary Seth Wheeler.

"We've been meeting with him and now he's transitioning out which means the issue will now be taken up by a new guy," said a Washington lobbyist who's been involved with warehouse issues.

Stern and other executives have met to discuss warehouse credit with new Federal Housing Administration Commissioner David Stevens, whose industry experience includes stints with Wells Fargo Home Mortgage, Freddie Mac and Long & Foster, a large Washington realty firm.

The agencies have said little publicly about what they might — or might not — do to help the warehouse sector but most of the industry believes the easiest way to increase liquidity to nonbank lenders would be for Fannie and Freddie to purchase participations in warehouse lines.

But even if FHFA signs off on the idea, it will need Treasury's approval, a process the could be extended by Wheeler's departure, observers said.

One potential problem has been resolved, at least for now, because the Federal Deposit Insurance Corp. has ordered BB&T Corp. to continue providing credit to the 70 nonbank lenders that relied on Colonial Bank's warehouse business; BB&T acquired Colonial, of Montgomery, Ala., last month.

"It's good news that the warehouse group was transferred over to BB&T intact," said Glen Corso, a principal in Warehouse Lending Project, an industry advisory group. "Per the FDIC's orders they have to keep it open a year."

However, the future of Colonial's warehouse business is unclear. Two of Colonial's top warehouse executives, Cathy Kissick and Laura Bryant, have been put on administrative leave.

And the Treasury Department is investigating the warehouse relationship between Colonial and its largest customer, Taylor, Bean & Whitaker Mortgage Corp., which recently filed for bankruptcy protection.

Taylor Bean had hoped to buy the bank using funds through the Treasury's Troubled Asset Relief Program, but the deal fell apart a month ago. All this bad news for warehouse lending leaves Stern nervous.

"This is a looming crisis," he said. "And it's getting worse."

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