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Special Reports
Secondary Market
Warehouse Line Program Aimed At Portfolio Holder
The terms on most warehouse lines of credit require that the originator sell the
loan in the secondary market as soon as possible in order to free up more credit.
Bayview Financial here has introduced its Warehouse Plus Line, which explained
Stuart Waldman, managing director for structured finance, fits the company's long-term strategy.
He said Bayview is an aggregator of both commercial and residential mortgages,
and believes it has the expertise to be comfortable with all sorts of asset types.
It is designed with the portfolio lender in mind. Mr. Waldman likened Warehouse
Plus to "life of loan financing."
For providing the financing, Bayview gets a credit protected senior interest in
a pool of loans. It will make the advance based on the credit level of the assets. A traditional warehouse line
makes its advances based on the credit level of the lender. "Our Warehouse Plus Line was developed to give
financial institutions and specialty lenders direct access to the securitization market in a cost-effective manner,"
he said.
Because it does not take on counterparty risk, Bayview does more of an asset-level
due diligence and not a seller-focused due diligence, he continued. It is more interested in the cash flow from
the asset for the warehouse line to be paid back, and not in the proceeds from the sale of the loan.
Each individual funding is structured as a sale of loans, but the originating
institution receives the economic benefit equivalent to all income less the agreed-upon financing rate.
Loans eligible for permanent warehouse funding are stated-income, stated-asset
and equity-based loans; subperforming and nonperforming loans; loans originated outside of investor guidelines;
commercial loans including special purpose properties; multifamily or mixed-use-property loans; and high loan-to-value
loans.
The program provides non-recourse funding to the borrower, thus no personal guarantees
are needed. This is beneficial for specialty lenders, whose warehouse lines are tied directly to their personal
assets. Bayview added that the program could be as effective as a supplemental or primary funding source for an
origination program, enabling the originator to sell or retain servicing.
Even though the program bases its financing on the asset, it is not comparable
to the hard moneylenders, Mr. Waldman said. Bayview is not looking at the underlying property but at the creditworthiness
of the borrower.
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