Wells May Offer $4 Billion in Warehouse Lending

Wells Fargo & Co. (WFC) is said to be in discussions to launch a warehouse lending unit that may provide billions of dollars in funding to independent mortgage bankers, Bloomberg reported last week. Wells is already telling lenders the program might provide up to $4 billion in warehouse credit, sources told Bloomberg. The announcement comes as smaller, independent lenders are finding their warehouse lines shrinking — or disappearing altogether — as more and more borrowers flock to the promise of lower mortgage rates. The influx of interest in refinance has put pressure on independent mortgage bankers’ resources to the point that loans are taking weeks longer to close than usual and, in some cases, are being turned away due to a lack of funding from a shrinking number of warehouse lenders, HousingWire‘s sources say. The Mortgage Bankers Association recently said that it had increased its forecast of mortgage originations in 2009 by over $800 billion, due to a refinancing boom as mortgage rates have headed below the 5 percent mark in some cases. The MBA said it now expects originations to total $2.78 trillion. Jay Brinkmann, MBA’s chief economist and senior vice president of research and economics, said the revised forecast could “test the operational capacity of a number of mortgage banking firms,” citing the reduced availability of warehouse lines as a chief concern. In response to a growing dearth of funding for non-depository mortgage lenders, the MBA in late March sent a letter to key regulators asking for changes in risk-based capital weightings tied to various warehouse lines of credit. Calling the decrease in warehouse credit availability for lenders a “signficant, yet avoidable, bottleneck”, MBA president John Courson suggested that regulators look at easing capital requirements tied to warehouse lines of credit. Doing so, according to the MBA, would make it easier for banks to extend warehouse lines to independent, non-depository mortgage bankers; it would also remove an impetus many banks currently have for reeling in existing warehouse lines, as well. JP Morgan Chase & Co. (JPM) was the most recent in an alarming trend of lenders scaling back on their warehouse operations, announcing in late February it would close the warehouse lending division it bought from Washington Mutual, saying it “didn’t fit our long-term strategy.” Write to Diana Golobay at [email protected]. Disclosure: The author held no relevant investment positions when this story was published. Indirect holdings may exist via mutual fund investments. HW reporters and writers follow a strict disclosure policy, the first in the mortgage trade.