Warehouse Lending Is Helping to Fuel Growth in Home Renovations
Spring. It’s the most popular time of year to shop for a home.
Industry experts expect this year to be one of the most competitive spring home-buying seasons in a decade, as housing inventory continues to remain thin. In response, many people are choosing to take advantage of the opportunity to renovate. 2018 looks to be a big year for home renovations, with improvement projects expected to clock in around $340 billion this year – up 7.5 percent from 2017. Whether purchasing a home that needs a little TLC or remodeling an existing home to increase the level of personal enjoyment now while creating added value toward a future sale, renovations are on the rise and homeowners are discovering the array of mortgage programs available to assist with their housing upgrades.
“Steady gains in the broader economy and in home sales and prices are supporting growing demand for improvement,” said Chris Herbert, managing director of Harvard University’s Joint Center for Housing Studies, noting a recent JCHS report indicating that 2018 may mark the biggest gain in remodeling spending in the last 10 years.
As homeowners see their property values continue to rise, renovation programs and products offer a great opportunity to use their home equity to upgrade, remodel, or generally improve what is typically one of their largest financial investments—their home.
According to Deric Barnett, PlainsCapital Bank executive vice president of national warehouse lending, mortgage lenders are seeing their role in this area increase.
“Being a premier warehouse provider for renovation programs, PlainsCapital Bank’s warehouse lending division works with independent mortgage bankers across the country to fund these as well as other loan products,” said Barnett.
What is Warehouse Lending?
Simply put, warehouse lending is asset-based lending of the commercial variety, where a financial institution—like PlainsCapital Bank—provides funds to an independent mortgage banker (IMB) in the form of a short-term, revolving line of credit. IMBs are generally small businesses, with mortgage lending and servicing as their sole or primary business. They are referred to as “mortgage bankers” because, unlike mortgage brokers, they fund their own loan originations. Within the industry, they are classified as non-banks, since they do not offer depository services like savings accounts and checking accounts.IMBs use the funds from their lines of credit to provide home loans to prospective and existing homeowners. When the mortgage bankers subsequently sell the loans to institutional investors on the secondary market—typically within 30 days of closing the transaction—they use the money received from the sale of the mortgage to replenish their lines of credit.
The Important Role Warehouse Lending Plays in the Residential Mortgage Industry
Mortgage bankers exist to provide added financing options to consumers and are credited as a key factor in the housing market recovery in recent years. As recently as 2010, banks were the dominant players in the mortgage industry, with the three biggest U.S. banks— JPMorgan Chase, Bank of America, and Wells Fargo— accounting for 56 percent of total mortgage originations. Following the 2008 housing crisis, many banks exited the mortgage business or pulled back the scope of their operations significantly. IMBs filled the void left by banks’ retreat and by the end of 2016 accounted for 47 percent of total U.S. mortgages. They rely on warehouse funding to do business. Without adequate warehouse lines of credit, mortgage bankers would be unable to service customers. And while a mortgage functions the same, whether originated by a bank or non-bank, Barnett says that to a certain extent mortgage bankers can be a little more agile and often offer a broader selection of loan products.
“Viewed as a whole, the housing market would be playing an even bigger game of catch-up in terms of number of transactions, were it not for mortgage bankers,” said Barnett.
Given the size of the mortgage industry—$1.69 trillion in total mortgage originations for 2017 alone— relative to the number of national warehouse lenders—currently around 80—that are charged with the herculean task of funding IMBs which comprise nearly half of the market, the warehouse lending sector proves monumental to the industry.
PlainsCapital Bank’s Warehouse Lending Services
As an established regional commercial and community bank with 30 years of banking history to its credit, PlainsCapital has been a trusted, reliable warehouse facilities provider to mortgage companies since 1992. Our reputation for industry-leading service coupled with a relationship-based lending philosophy are our defining points. This commitment to delivering outstanding customer service is why PlainsCapital’s warehouse lending professionals are among the most experienced in the business.
“We believe in personal-driven, not credit-driven, relationships,” said Barnett. “We look at the growth potential of our mortgage banker customers and the role we can play in helping them manage their pipeline and funding requests to help grow their businesses and reach their goals.”
- Warehouse lines of credit up to $50M
- Competitive rates
- Same-day funding, shipping, and wire transfers
- Eligible products: FHA, FNMA, VA, USDA, Jumbo, SFR, Clear-to-Close
- Renovation products accepted and allowed through warehouse facilities
- 60-day warehouse period
- Innovative technology platform providing 24/7 real-time reporting and pipeline management
- Operating procedures with enhanced security and privacy features
- Friendly and responsive operations team
Additionally, PlainsCapital’s suite of commercial products provides customers the online tools, dashboards, and payment services they need to easily access account information, perform banking transactions, protect their businesses against fraud, and manage their organizations’ cash flow.
To learn more about PlainsCapital’s warehouse lending services or to speak with one of our experienced warehouse lending professionals, visit PlainsCapital Bank’s National Warehouse Lending web page.