Bank turmoil causes mortgage execs to be confident in their warehouse lines
Signature Bank and Silicon Valley Bank’s failures have already impacted mortgage rates, but they aren’t expected disrupt depositories’ warehouse lines of credit, mortgage leaders claim. The government’s quick actions to establish bridge banks protected depositors, and kept funds intact, including two loanDepot nine figure funding facilities from Signature Bank. The Federal Home Loan Bank System meanwhile has issued nearly $250 billion of debt this week to regional and community banks seeking to shore up liquidity, stem bank runs and appease shareholders.Publicly traded mortgage giants have issued statements this week distancing themselves from the turbulence on Wall Street, but private lenders have been silent. According to executives speaking to National Mortgage News, warehouse lenders are not talking, but IMBs claim they have been in constant contact with their warehouse providers and are confident that those lines will continue to be intact. Plaza Home Mortgage CEO Kevin Parra stated that they are not worried about the future of their ability to finance warehouse financing or MSR financing. “And our partners in these areas have assured us that even if they were marked-to-market, their securities value, they would still be solvent. They would also meet capital ratios as required by the FDIC. “Adobe Stock, Bloomberg News Federal Deposit Insurance Corp. runs the bridge institutions for both banks. It has appointed banking and mortgage veterans as their leaders, ensuring that business flows as normal following a weekend of panic. Only loanDepot has revealed a relationship to one of the banks in distress. In a Securities and Exchange Commission filing, the massive lender disclosed that it moved $225m of corporate cash balances out of Signature Bank this Week and retained a $300m warehouse facility, to which Signature is 50% participant, and a $300m servicing rights facility with the former New York-based institution. Rocket Cos. and United Wholesale Mortgage, as well as Guild Mortgage, have stated in SEC filings that they have no ties or connections to the failed depository. They also maintain warehouse lines of credit with large global banks. Although the industry leaders don’t publicly promote their warehouse lenders, SEC filings reveal that they have repurchase agreements with global institutions such as JPMorgan Chase and Bank of America. The third bank to close down recently was crypto-friendly Silvergate Bank, which closed its warehouse lending operations during the fourth quarter of last year. According to Freddie Mac, the biggest impact of the banking crisis on lending has been its dampering on mortgage rates. After a month-long climb, they fell 13 basis points to 6.6% this week. Anxious investors turned to Treasuries following the weekend’s events. However, yields on 10-year Treasuries fell although they remain volatile. He said that banks are likely to reduce their lending. After assessing IMBs that have direct ties to banks and reassuring other lenders partners, they may do so. “Then they’ll make calls to everyone relative not only to the risk of their counterparties but also to instill some confidence that the bank’s still in the business and they’re going on to continue to be in it,” he said. Justin Messer, CEO at Prosperity Home Mortgage, stated that banks in search of liquidity might pull back portfolio products such as adjustable rate mortgages, jumbo loans, or warehouse lines. He said that warehouse financing has a lot of excess capacity today. “The lines that are available have very little utilization for the most part. Messer said that while a bank would be shocked to leave the space, a depository reducing a warehouse facility by 50% wouldn’t cause too much pain for a lender. The mortgage volume is still low at the edge of spring, down 56.8% from last year. Ted Tozer, ex-head of Ginnie Mae, stated that warehouse lending has been a profitable business and that banks are closely monitoring their mortgage partners today. He said that warehouse providers remained steadfast during the 2018 mortgage rate rise, and did not withdraw their funding facilities. He said that warehouse providers will give people time to adjust and then they can take any type of drastic action. They are not reactive from this perspective. “So from that perspective, they tend not to be reactionary. He said that no bank will tell you they are in trouble because that’s what causes the problem. Experts on Monday’s LendersOne panel predicted that there would be a flood of margin calls from firms that hedge mortgage pipelines. This is similar to the panic that erupted in the wake of the coronavirus pandemic. Shamrock’s Corriea stated that brokers have been active. However, he said that they are “keenly aware” about the value of aged warehouse assets. This is similar to the rush at the coronavirus pandemic’s onset in late March 2020. Lenders earlier this week suggested that it was too early to gauge whether there’s widespread concern among potential borrowers as Wall Street and feds work to alleviate economic fears. Sunday evening, Prosperity sent an email to all employees confirming that it had not been exposed to either bank failing. Messer stated that Prosperity deals with a lot of first-time homebuyers and that news like this causes people to take a step back from their purchase of $300,000. This is a far cry from the panic of the Great Recession’s early banks failures. Parra stated that the comparison was “radially too much”. There is no comparison between 2008 and the weekend with two banks. Not even close. It’s essentially really poor bank decisions, and it’s not a major problem.