GSEs To Fund Warehouse Loans?

Posted by Orb Staff on March 31, 2009 No Comments
Categories : Residential Mortgage

The Federal Housing Finance Agency (FHFA) is considering strategies for how Fannie Mae and Freddie Mac may help shore up the warehouse lending market, the Wall Street Journal reports, citing an unnamed FHFA spokesperson.

Warehouse lines of credit, which support mortgage banks' lending efforts, have become a casualty of the credit crisis, and industry members see their resurgence as a necessity to the housing market's recovery.

The reduced availability of warehouse loans was identified by the Mortgage Bankers Association's (MBA) chief economist and senior vice president of research and economics, Jay Brinkmann, as a potential obstacle if the industry is to reach the level of originations that is projected for 2009. Warehouse lending has decreased from $200 billion in 2007 to between $20 billion and $25 billion today, according to the MBA.

According to the Wall Street Journal, the FHFA has asked the MBA and others to propose a plan for how the government-sponsored enterprises (GSEs) can lend an assist on this end. Last week, MBA CEO John Courson wrote a letter to bank regulators asking them to reconsider the risk-based capital rules of warehouse lending.

Among the proposals in circulation is that Fannie Mae and Freddie Mac would guarantee debt issued by warehouse lenders, the Wall Street Journal article notes. The FHFA might be able to sidestep the legislative process and allow the GSEs to help fund warehouse loans, Courson told the paper.

"We just don't have the luxury of time for going through the legislative meat grinder," he said.

SOURCE: Wall Street Journal

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