Warehouse Lending Project

The Issue

• Warehouse lending is a critical link in the housing finance chain, providing short-term funding for loans that are eventually sold into the secondary market to Fannie Mae, Freddie Mac and Ginnie Mae.

• Lenders that utilize warehouse lines of credit account for approximately 41% of all residential mortgage loans in the U.S., and nearly 55% of popular FHA loans.

• Estimates are that since 2006 warehouse lending capacity available to the industry has declined by nearly 90% to approximately $25 billion today.

• Based upon newly revised projections of 2009 lending volume there could be a $400 billion shortfall in home mortgage availability caused by a lack of warehouse lending capacity.

• Unless federal policymakers promptly address the issue, borrowers seeking to take advantage of today’s low rates will face rising interest rates and reduced credit access.

What This Project Is About

The Warehouse Lending Project is a developing coalition of independent mortgage banking companies  that have joined together to communicate this issue to policy makers in Washington, DC and to advocate solutions that will ensure that borrowers have access to credit at this critical point in the housing cycle.

The lenders that are members of The Warehouse Lending Project depend upon  warehouse lines to fund their loan originations. The number of lenders offering warehouse lines has declined significantly in the past few years, increases in existing lines have been scarce and cutbacks have become more common. Terms on warehouse lines have also become  more expensive and very volatile as the economic crisis continues to play out.

The mortgage banker members of The Warehouse Lending Project are committed to finding solutions to both expand the capacity offered by existing warehouse lenders and bring capacity from new sources into the market

 News

Warehouse Lending Project  Report on Fannie/Freddie Pilot projects for warehouse lending

October 7, 2009 

Warehouse Lending Project issues Press Release with revised Warehouse Credit Gap for 2009

March 26, 2009

 Warehouse Lending Project issues Press Release on Financial Services Committee Testimony 

February 3, 2009

Warehouse Lending Project files Written Testimony with House Financial Services Committee

February 3, 2009

Warehouse Lending Project issues Press Release announcing formation of group and issue basic

January 5, 2009

Potential To Undermine Housing Recovery

• Lower interest rates and rising FHA lending volumes, combined with reduced availability of warehouse credit, are already putting strains on traditional mortgage banks.

• In recent weeks, loan applications for refinancing have jumped in response to further declines in interest rates, while applications for home purchases are finally showing signs of picking up.  Failure to ensure adequate warehouse lending capacity could blunt a long-awaited housing rebound and undermine broader economic recovery.

• Without adequate warehouse capacity, lenders will be forced to raise interest rates in order to reduce demand and manage their loan application pipelines.  In addition, constrained warehouse lending capacity could cause the mortgage market to experience extended loan processing times, rate lock expirations and other related problems.

• Recently three major warehouse lenders have announced their exit from the business over the next 6 - 9 months, so the situation is fast becoming critical.

Opportunity to Provide Warehouse Lending Backstop is Now

In light of recent trends in the warehouse lending market, the opportunity is now to establish a backstop to expand the availability of warehouse credit facilities at this crucial time.

Acting now to preserve the availability of warehouse credit will:

• avert near-term credit availability problems for homeowners and home buyers,

• prevent potential primary market bottlenecks if more warehouse lenders exit the business or are unable to increase their lending

• support the housing market recovery as refinance activity recovers and when purchase activity picks up in 2009-10.