Pressure on Warehouse Outstandings

Warehouse credit for nonbank borrowers is probably the most plentiful it's been since financial markets melted down three years ago. Banks, both large and small, have entered the sector, realizing strong profits can be made for little risk.

But there's been just one little hiccup in the warehouse market this year: the nation's independent mortgage banking firms aren't as thirsty as they used to be... Welcome to the new world of warehouse finance, one where nonbank mortgage firms still want--and need--credit but keep their facilities (borrowings) open for shorter periods of time, which translates into lower profits for the banks extending the lines.

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But don't for a second think warehouse lending is about to enter another period of upheaval. Over the past year just one bank--SWS Group of Dallas--has scaled back in any noticeable way... [according to one estimate] at least six banks have entered the business since the fourth quarter, including MetLife Bank, People's United and Republic Banking & Trust. "And there's still new banks looking to get in," he said. "I talked to two this week."