Jeff Rickard

It is in your best interest as a Realtor to begin to schedule closings in the afternoon, especially at the end of the month. There is a new player that is taking their time in reviewing the loan before releasing funds. That new player also does not recognize the urgency that we as mortgage people or Realtors sometimes put on a closing. At this point due diligence and caution are the industries priority.

With all the turmoil in the mortgage world we are seeing changes and increased involvement in all aspects of the business. This increased involvement by previously transparent players will slow down the process of closing a loan, at least for the time being. As a Realtor or client, what was once invisible to you will now have an effect on how you do business. One of these transparent players that are under a lot of pressure lately are warehouse banks.

What are warehouse banks? All mortgage companies that are closing loans ultimately are getting their money from the financial markets by packaging loans and selling them on the secondary market. But before a loan finds its way to Wall Street the loan is parked at an interim bank on a line of credit. The interim bank is the warehouse bank. Using their line of credit mortgage companies will close loans in their own name everyday until they can deliver them to the secondary market. When a mortgage company closes a loan today it may sit on a warehouse line for a few weeks while waiting to be transferred to an investor. This goes on every day; money flows out and then flows back into the warehouse bank. No matter the size of the mortgage company they rely on short term credit until they can deliver their loans to Wall Street.

So, what’s the problem? With the liquidity in the secondary market drying up and loan programs changing at a moments notice, warehouse banks are getting stuck with loans that can now not be sold. That is a very big problem for warehouse banks, a problem that is really unprecedented.

How are they reacting? By becoming involved in the loan process, by analyzing the products sold to a borrower and by wanting multiple places of delivery for loan products. What this means is that people who were not really involved in the day to day business of originating a loan are now analyzing all transactions. New procedures that have never been part of the business model are now in effect. Niche products that have only one purchaser on the secondary market are being scrutinized.

Eventually we will get a handle on the new processes but until then be aware.

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