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Chase Kills Warehouse Lending Unit

March 1st, 2009
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JP Morgan Chase is out of the warehouse lending business, only weeks after killing its wholesale mortgage division.  Warehouse lending  takes place when a larger bank gives a mortgage banker a revolving line of credit for directly funding mortgages which are then quickly sold into the secondary market, replenishing the credit line.  Wholesale lending is selling mortgages through mortgage brokers who never assume any financial responsibility for the loans.

Chase acquired the warehouse operation from Washington Mutual in early 2008 then later took over the remaining WAMU assets in September with the assistance of the Office of Thrift Supervision.

In January, Chase dropped its its mortgage broker or wholesale lending business.

The departure of the Chase’s warehouse operations is a further blow to third-party originations and comes as small- to mid-sized mortgage bankers are struggling to find additional warehouse lines.

Mortgage Bankers Association President and Chief Executive Officer John A. Courson testified to Congress last month that many of the trade group’s independent members have been hamstrung from the lack of available warehouse lines-of-credit from commercial banks. He explained that warehouse lenders are either restricting existing warehouse lines, terminating the lines or going out of business.

“For the originator that depends solely on warehouse lines-of-credit, this reduction could reduce liquidity, extinguish their lending business, and adversely impact the consumers in their market, stifling the real estate recovery before it has a chance to get off the ground,” Courson stated.

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A Third of U.S. Mortgages are Low-Doc or Worse, Regulator Survey Shows

February 28th, 2009
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Federal banking regulators said last week in a new report that nearly one-third of outstanding mortgages were approved with less than full documentation. Around one-fifth had credit scores below 660, and more than 90 percent were serviced by a third party. The findings came from the Comptroller of the Currency and Office of Thrift Supervision, which jointly surveyed the 14 largest mortgage servicers.

Banks surveyed were Bank of America, Citibank, First Horizon, HSBC, JPMorgan Chase, National City, U.S. Bank, Wachovia and Wells Fargo. Thrifts surveyed were Countrywide, IndyMac, Merrill Lynch, Wachovia FSB and Washington Mutual. All of these thrifts have either failed or been acquired since last summer.

The respondents serviced 34,877,891 mortgages for $6.1 trillion as of Sept. 30, 2008. Their combined portfolios accounted for around 90 percent of first mortgages serviced by banks and thrifts and more than 60 percent of all U.S. mortgages.

The servicers owned less than 10 percent of the loans they serviced, based on the number of loans outstanding. Those loans were owned by third parties through residential mortgage-backed securitizations and loan sales. The share of loans serviced for Fannie Mae and Freddie Mac was 62 percent.

Around nine percent of the loans serviced by the surveyed institutions were subprime. Borrowers with credit scores below 620 were considered subprime.

Alt-A loans amounted to 10 percent, the report said. Alt-A included borrowers with scores between 620 and 659. Low- and no-documentation loans made up 30 percent of loans serviced by the institutions.

Jumbo mortgages amounted to seven percent.

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