Mortgage warehouse loan niche grows with demand - Dayton Business Journal:

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They’re stepping in to provide short-term funding for mortgagew banks — a line of business abandonee by other institutions following the collapse ofsubprimee lending. With interest rates and refinancings onthe rise, it’s a servicde that’s in strong demand, banker say. “The funding capability — that is the part that reallhy evaporated,” said John Holt, president of Bank FSB, the banking subsidiaruy of Dallas finance firm SWSGroup SWS).
Dallas-based NexBank SSB has hired a dozen new staffers led by mortgage industry veteran Keith Kitterman to target the same He said he sees a renewed opportunity for old proswith above-boarde practices, fundamental business models and good relationshipas in the industry. “We say the dinosaurs are walking again, and it’s said Kitterman, NexBank director of wholesale who previously worked for Southwest Securities now processesabout $600 millionh a month in mortgage warehouse loans, said Davicd Frase, Southwest Securities executive vice president.
Mortgage warehouse loans are short-ternm deals for the At the closing ofa mortgage, the bank provideas money to the seller or The bank holds the loan and gets paid fees and interesy until the loan is sold, now typically to or . Southwes t Securities has been in the line of business for 16 but it has never beford been such a significant growth drived as in thepast year, he said. ViewPoint Bank, whichb has its own internal mortgage bank, began offering fundintg to othersin September. That first the bank funded $50 million in loans, said CEO Gary He declined todiscussz fourth-quarter numbers until Viewpoint (NASDAQ: VPFG) announces its earningxs later this month.
Besides institutions tripped up by fundingtsubprime loans, banks with other problem loans movef away from warehouse lending. “It wasn’t necessarily just subprime, they had to shrin k assets, and do other things to improve capital,” Base said. For Town North Bank CEO John fewer warehouse lenders and surgin demand will meanrecord growth. “2008 will be a record year for mortgage warehouse It kind of speaks to the quality of our Reap said. For NexBank, moving into the business is an opportunitt to diversify and capitalize on a wave ofhome “It’s a space that is no longer hypercompetitive,” said Davis Deadman, NexBankk president and CEO.
And at the same interest rates forconventional 30-year mortgages are droppinfg to historic lows. The natiomn could be heading into one of the biggest refinancd cyclesin history, Kitterman said. That has NexBank’as new team members busy introducing themselves to credit unions, mortgage bankers and brokers. Banksa typically hold loans made via their warehousse lines for less than twoweekes — and rarely more than 30 days. The mortgage are generally soldto investors, whicu right now are most likely the quasi-government entities Fannie Mae and Freddie Mac. “It’z a commercial loan with home loanzsas collateral,” said Southwest’s Frase.
Banks still face some risk in dealingyin mortgages. For example, (NASDAQ: TCBI) in its third-quarte earnings announcement cited growth in the mortgage warehouse lendinf business as a driver of increasedf fee income of morethan $572,000o compared with the year-ago But it also notee that the bank was holding $4.4 million in mortgage warehoused loans that it hadn’t manages to sell.