The company quietly added its first client in May and is looking for new customers to add to its roster.

“We’re looking to add more people and are targeting relationships that we’ve had in past,” said Kimberly Browne, Executive Director at UBS Securities Co. The company is looking for lenders with $10 million in tangible net worth, but it’s willing to consider others if they have extensive experience.

Prior to the subprime crisis, UBS was an active investor in HECM product. As of right now, it isn’t looking to get back into purchasing whole loans, and it sees that as an advantage over most of the competition. Correspondent lenders like MetLife and Sun West offer warehouse lines to customers, but often require that the loans be delivered to their own channels.

ReverseVision is the first company to built its platform to interface and submit loans directly to UBS.

“We are just a small wheel in the industry, but by adding UBS as a warehouse lender to our list of interfaces we do what we always have done best, bring great companies together,” said Thomas Martignoni, CEO of ReverseVision in an email to RMD.

Overall, reverse mortgages are a small part of UBS’s warehouse business, with most coming from “forward” government programs, USDA, and non-conforming jumbo products. Browne told RMD it can help customers expand their relationships with other investors like REITs that are looking for non-conforming products. However, don’t expect proprietary reverse mortgage products in the near future, says Browne.

“[Jumbo reverse mortgages] are pretty far away, not this year or early next,” she said.

HECMs are a nice piece of business for Texas Commercial Bank, said Jack Nunnery, senior vice president of the bank. He said Texas Commercial is committed to providing financing for those loans, as reported by Origination News. He also noted that liquidity is good in the marketplace for reverse mortgage loans and that secondary market execution is coming back to a level of normalcy.

Another conference speaker, Elaine Batlis, senior vice president, warehouse lending manager at Silvergate Bank, said there are a number of strong secondary market investors for HECMs, which makes them a good product from a warehouse lender perspective. According to the Origination News report, during her presentation, Batlis said that for any loan product originated, warehouse lenders would like to see lenders have multiple exit strategies.

The MBA secondary market conference is going on this week in New York City.

Read the Origination News article.

Written by Elizabeth Ecker

“Texas Capital Bank has been a tremendous partner to S1L and they have emerged as a premier player in the Warehouse Lending Business.  The leadership team at TCB has been extremely supportive of our firm and they have done a tremendous job of balancing capacity and service levels to their clientele”, said Torrey Larsen, President of Security One Lending.  “We look forward to building upon our existing relationship”

Texas Capital Bank is a subsidiary of Texas Capital Bancshares (NASDAQ: TCBI), a commercial bank that delivers highly personalized financial services says the company website.

Security One Lending is currently licensed in 13 states and plans to be licensed in 38 states by year end.  Combined with Omni’s production, Security One has endorsed 689 HECMs YTD according to HUD data. 

“Warehouse lending has been, and continues to be, the major issue for non-depository mortgage banking firms” said Torrey Larsen, President of Security One Lending.  “Our relationship with Silvergate Bank provides the liquidity for our firm to expand and meet the growing demands of the marketplace.  Additionally, we are pleased to be working with such a well run, well respected organization as Silvergate.”

In April, Silvergate established its warehouse lending division and named Elaine Batlis as the head of the divsion.  Batlis brings over 20 years of experience to the bank and has a solid record of successfully establishing warehouse lending programs and managing multi-billion dollar mortgage credit facilities said the statement. 

As an interesting side note, private equity firm JAM Equity Partners acquired a 9.9% stake in the bank earlier this year.  JAM has been looking to invest in established reverse mortgage lenders, so this could signal they’ve made a deal with Security One.  I’m speculating here, but with the San Diego, CA based lenders size and multiple distribution channels it would make sense.

Recent estimates from The Warehouse Lending Project indicate that the number of active warehouse lenders declined from a peak of more than 115 in 2005, to fewer than 30 today.  The total aggregate capacity of warehouse lending credit has declined to about $25 billion, down nearly 90% from the level reported in 2007.

Warehouse lines provide reverse mortgage lenders with advantages and risks that companies don’t have when they broker loans through wholesale lenders.  One of those advantages is that it offers you a level of control that brokers can’t provide. 

“We have a better level of control of the service that we can deliver to the loan officer and their client, compared to having a wholesale lender underwrite and fund the loan,” said Torrey Larsen, Chief Executive Officer of Security One Lending.  He added that having that control can be a double edged sword because when volume increases and you lack the necessary underwriting support you see longer turn times for your customers.

Since only a few national warehouse providers remain, many lenders are turning to midsize and local banks as a new source of funding.  Larsen said that he has been in discussion with several midsized banks who see an opportunity to earn a nice yield for the bank, above and beyond their cost of deposits, by offering warehouse lines.

“We are working with several of them on not only their understanding of reverse mortgages but also understanding warehousing in general,” said Larsen.  He believes that independent mortgage bankers like themselves can really identify another source of funding that they never had to rely on in the past by reaching out to this bank profile.

Warehouse lending can be a very profitable business when run correctly.  Providing lines for reverse mortgages also have some advantages over traditional “forward” loans.

For starters, there is less risk selling reverse mortgages compared to the forward business because HECMs aren’t credit driven. “Since it’s collateral underwritten and not credit underwritten like forward loans, there aren’t as many problems that can spring up in post closing,” said Marc Helm, COO of Reverse Mortgage Solutions.

The fact that almost all reverse mortgages are refis should also make HECMs attractive to warehouse providers.  “Since the borrower is signing all the docs at closing, you already have the docs needed to get the submission process started with end investors (ie. Fannie Mae) before the loan is funded.”  By starting this process early, reverse mortgage lenders are able to get loans off of their warehouse line fairly quickly compared to the “forward” business said Helm.

Warehouse providers typically charge lenders a per file fee which sometimes includes both an in and out fee so the more units you fund the more fee income a provider earns.

There continues to be talk of some major banks getting into warehouse lending, but that hasn’t calmed the fears of lenders having warehouse lines pulled.  Several executives at reverse mortgage lenders told RMD that, “Losing our warehouse lines is the single biggest item that keeps me up at night.”

The first is Sun West Mortgage, Inc. who is based out of Cerritos, CA.  They do have a link to their website about  warehouse lines and if you don’t mind providing your contact information you can download a copy of their application.  One of their sales reps contacted me a few days ago and it seems like they are allowing a few different methods of delivery for reverse mortgage production.  I’ve also been told that Generation Mortgage is willing to offer their customers access to a warehouse line if the production volume meets a certain limit,  but I wasn’t able to find anything on the website confirming it.  The third and last company that I have come across is First Collateral which is owned by Citigroup.  I spoke with one of their account reps and they don’t have a large amount of customers that are using their lines for reverse mortgage production but they’re welcome to new clients that can provide substantial volume. 

It’s no secret that there are a lot of mortgage brokers out there who really want to obtain a warehouse line.  From my experience as a wholesale account executive most mortgage brokers look at a warehouse line as something “sexy” that they can tell all their AE’s and friends about to make themselves come off as a “big mortgage banker”.  In my opinion warehouse lines can be a great addition to someone’s business if it can be managed correctly, because it provides control over the entire mortgage process.  However, with all of the companies as of late that have had to repurchase loans from investors I wouldn’t think a lot of mortgage brokers are looking to get into funding their own loans… but I could be wrong.  I’d love to get some comments on using a warehouse line to fund reverse mortgage production if anyone has any. 

I hope everyone had a great weekend… the weather was beautiful here in Chicago.

Cheers!

Technorati tags: Reverse Mortgage, HECM, Warehouse Lines, Senior Finance