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Special Reports
Warehouse Lending
MortgageParticipation.com Recruits Banks
By Brad Finkelstein
HOUSTON--Earlier this year, during the height of the origination boom, many of
the smaller warehouse providers were at their regulatory capacity and could not provide any more credit.
On the other hand, there are banks that have high liquidity but low loan demand.
These institutions typically lend their excess funds through the Federal Reserve but there is a very low return.
As a result, some of these institutions are looking to get a better rate of return.
That is where Mortgageparticipation.com comes in. Mortgageparticipation.com is
the marketing arm for Warehouseline Ltd., said the person who founded both companies, Bruce Reichstein.
Warehouseline Ltd. serves as the marketing program for a number of financial institutions
that provide warehouse lines. It acts as the go-between for the mortgage originator and investor.
Because the typical bank Warehouseline Ltd. works with has assets in the $100
million to $200 million range, these institutions reached their capacity to lend as originations hit record levels.
However, Mr. Reichstein found that many of the banks he worked with were willing
to participate with other banks. So the Mortgageparticipation.com website was created. The response was huge, he
said. In a 90-day period over $20 million in participations were completed with another $20 million behind that.
The program is structured as a temporary purchase plan for regulatory reasons.
With a warehouse line, the entire line has to be treated as a single loan for the purpose of the lending to a single
borrower limit. With the temporary purchase plan, Mr. Reichstein explained, each mortgage loan is treated individually.
Banks that are interested are sent a sample package by Mr. Reichstein. If they
like the sample package, a sample agreement is sent to the institution for its consideration.
The return, according to the mortgageparticpation.com website, has been between
3.75% and 4% rather than the 1% banks have been getting from the Fed.
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