MBA National Secondary Market Conference

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MBA National Secondary Market Conference

• Warehouse Lending, from a Lender/Borrower
  Perspective

April 20, 2004
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Program Agenda

• What is Warehouse Lending?
• Warehouse Lending Cycle
• Types of Funding Sources
• Questions to Ask When Choosing a Lender
• Costs to Consider
• Benefits of Warehousing
• Questions Answers

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What is Warehouse Lending?

• Purpose
• Warehousing isnt rocket science...
• The purpose of warehouse lending is to provide
  short term financing to the mortgage lender for
  their single family, multi-family, and income
  producing mortgage loan inventory.

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Mortgage Banking Cycle
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Types of Funding Sources

• Table funding
• Purchase facilities
• Warehouse Lines
• Wall Street

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Warehouse Lending Cycle

• Funding Process
• Collateral Requirements
• Collateral Management

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Choosing A Warehouse Lender

• Key things to consider
• Industry commitment
• Industry experience
• Industry knowledge
• Relationship management

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Relationship Management

• Size up the situation
• What type of relationship is the lender looking
  for?
• What is their culture?
• Is this a mutual, long-term fit?

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Warehouse Lender Flexibility

• How easy is it to get an overline?
• What happens when a loan falls out of bed?
• What are the leverage constraints?
• What happens if a covenant is breached?

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Credit approval process

• What is the credit approval process?
• What is the lead time to get credits approved?
• Is it a Signature or Loan Committee process or
  trial by jury?

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Collateral processing

• Where will I be shipping my collateral?
• What type of technology does lender offer?
• What type of reporting does lender provide?

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Costs To Consider

• The rate charged on the warehouse line will be
  the single biggest cost.
• Ask about the index used
• Higher volume, greater negotiating power
• Fees

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What You May Need

• Unqualified audited financial statements
• Copies of certain agency approvals, e.g. FHA/HUD
• Evidence of EO and Fidelity Insurance of
  300,000

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Benefits Of Warehousing

• Enables the mortgage company to
• Pro-actively address RESPA reform
• Close in own name
• Negotiate better investor pricing
• Gain control over closing process
• Level playing field with competition
• Attract personnel

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Benefits Of Warehousing

• Potentially improves profitability through
• Positive arbitrage interest income or spread
  income
• Loans closed using a check, thereby picking-up
  some float income
• Utilizing escrow deposits to reduce borrowing
  costs and bank service fees

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Question Answer

• Q A