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Special Reports
Warehouse Lending
Southwest Hires Frase
By Brad Finkelstein
Southwest Securities FSB here has hired David Frase as its new executive
vice president of mortgage warehousing.
Mr. Frase has been in the warehouse side of the business since 1993, starting when he was working at Provident
Bank, Dallas. He then moved to Texas Capital Bank NA, Dallas, in 2000, where he established that company's national
warehousing program.
Mr. Frase said one of the reasons why he joined Southwest Securities is because of its desire to grow, especially
in the broker-to-banker channel. Texas Capital's clients were mortgage brokers looking to make the move up and
Southwest Securities is looking to go in the same direction.
But, that being said, he added, Southwest Securities also has warehouse programs for the larger lender as well
and he hopes some of the brokers will grow large enough for those products.
According to the most recent edition of the Mortgage Industry Directory, Southwest Securities ranked 19 of the
23 warehouse lenders at year-end 2005. The directory lists Southwest Securities with $250 million in commitments,
down 28% from $345 million at the end of the previous year.
Warehouse lenders are working their way down to the smaller lenders. Mr. Frase said the warehouse providers that
deal with the smaller lender like them because they are more nimble and able to bend with changes in the marketplace.
He is seeing an increase in demand for warehouse lines especially among mortgage brokers. Having a line of credit
is one way for a broker to differentiate themselves in their marketplace.
Another reason for the increased demand, he said half-jokingly, is with the slowdown in volume, mortgage brokers
have the time to work on their applications to obtain warehouse lines of credit.
Southwest Securities prefers each loan funded off the line have a secondary market purchaser in place before funding
is made.
Part of the job of the warehouse lender, especially for the broker-to-banker end, is to introduce mortgage brokers
to investors wherever it can, Mr. Frase said. As brokers, they have not had access to these sources.
It provides credit for all types of loans on the credit spectrum, but it does have sublimits. Right now, Southwest
Securities is seeing a shift in the market towards the A-minus credits.
Among the reasons given by mortgage brokers in the past several years for seeking warehouse lines of credit was
regulatory. Mortgage bankers do not have to disclose a yield-spread premium, plus in some states they have less
onerous regulatory requirements than for mortgage brokers.
But the "smart brokers," said Mr. Frase, know there are more important reasons then not having to disclose
the YSP to get a warehouse line.
These include the oft-cited better pricing for closed loans compared with brokered loans and the ability to control
the loan process through closing better. These brokers, he said, see it as the next logical step to bring their
business up to.
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