Warehouse lending conditions continued to improve in the second quarter; commitment volumes rose for most players — thanks in large part to a mini-refinancing wave sweeping the nation.
Exclusive survey data compiled by National Mortgage News said industrywide commitments fell slightly, to roughly $27 billion at June 30 from the year earlier. (NMN assumes it has captured 70% of the warehouse market.)
But the results belie the fact that PNC Financial Services Group Inc.'s flagship bank subsidiary is winding down the warehouse division of the former National City Corp., once a top player in the market. Also, Colonial Bank, the nation's No. 2 warehouse provider, is now part of BB&T Corp., which cut loose some of Colonial's customers when it took over the troubled bank last fall.
In other words, in the second quarter of 2009 National City and Colonial were still actively offering warehouse lines, but in National City's case, this is no longer true. (PNC is to wind down National City's warehouse unit for good by yearend.) With the short-term outlook for residential loan production greatly improved from a few months ago (some lenders think the industry could wind up just shy of last year's $1.9 trillion origination mark), warehouse lines are in demand.
Of course, warehouse providers, for the most part, continue to be in the driver's seat when it comes to setting terms. Michele Perrin, who brokers warehouse lines through her firm Perrin & Associates, sees conditions improving slightly for nonbank borrowers.
She recently brokered a line of credit for a home-builder-owned lender and received multiple offers, something that probably would not have occurred a year ago.
She and Larry Charbonneau, who also advises clients on warehouse deals, both cite a major positive on the horizon: the entry into the sector of MetLife Bank, a subsidiary of the insurer MetLife Inc.
The New Jersey bank, whose mortgage division is in Texas, plans to officially start its warehouse division in the fourth quarter and is hiring four to six people for the business.
Brian Lewand, a managing director and the head of capital markets at MetLife, said, "We plan to have a meaningful presence in the warehouse market." He declined to estimate volumes or how fast the company might rack up warehouse commitments but noted that the bank plans to be a national player in the business. He has worked at MetLife for 15 years.
MetLife recently hired two warehouse executives who are former officials of Sovereign Bank in Pennsylvania. One had left Sovereign recently; the other, several months ago. Their departures from Sovereign, though, have raised concerns about its commitment to the business. (The bank, which is owned by Santander of Spain, declined to comment.)
MetLife plans to extend credit to nonbank mortgage lenders and also hopes to buy closed loans through its new correspondent division.
An increasing number of banks are considering getting into the warehouse lending business these days, but many regional players will only extend credit to nondepositories operating in their market footprint.
The largest player in the market continues to be Bank of America Corp., which at June 30 had about $15 billion of commitments. B of A's volume, however, is an estimate based on reporting done by NMN.
The banking company, like other warehouse providers, only extends credit to nonbanks selling closed loans to it on a correspondent basis. These "captive" deals were once in vogue but have eased in the past six months.
NMN found that several large warehouse providers, including JPMorgan Chase & Co. and Wells Fargo & Co., continue to keep commitment volumes nonpublic.