Part 2 – What questions should a mortgage lender ask their warehouse bank?
What warehouse line is best for your mortgage business? What questions should a mortgage lender ask their warehouse bank?
In Part 1 of our warehouse bank series, we discussed key questions to ask which involved warehouse bank associated costs, principal curtailments, net worth, and other qualifying requirements. This week we will continue our deep dive into the warehouse bank selection process by reviewing additional considerations for you to be aware of at time of initial application or upon renewal.
Now, if you have not yet done so, remember to take advantage of our complimentary 30-minute initial strategy call where we analyze your situation and discuss whether a banker transition process is right for you!
During this call, we will provide practical expertise and understanding of the process from mortgage licensing, investor approval and relations, warehouse bank selection, third party fulfilment providers, E&O and Surety bond companies, origination strategies, coaching, consulting, and more!
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Part 2 – What questions should a mortgage lender be asking their warehouse bank?
- Is your warehouse bank established?
How have they dealt with industry changing events that have happened over the past 15 years such as the 2008 financial crisis, COVID, and now the recent collapse of various Non-QM lenders? It is important to understand their history, track record, and the experience of the team that you will be working with.
- Does your warehouse bank offer flexibility with the type of products you offer?
In today’s environment, lenders are looking into every opportunity to expand their business into various markets. Maybe you specialize in manufactured homes, prime jumbo, USDA Rural Housing, FHA 203k, delegated underwriting, repair and renovation loans, or construction to permanent financing.
Take time to understand what appetite your warehouse bank has for the products you originate and if they have any overlays. Just like lenders, warehouse banks have their own internal requirements as well. The last thing you want to do is spend the time to get approved and then find out you are unable to fund a certain loan type.
- Are you able to scale from non-delegated to delegated underwriting?
As you climb the banker ladder, your level of volume or specialization in a certain loan program may open up the opportunity of delegated underwriting.
As a quick refresher, a non-delegated correspondent is responsible for funding and delivery of the loan package to the approving lender, but they are not responsible for underwriting and approving the loan since that is handled upfront by the investor who purchases the loan from you. Because of this, warehouse banks understand the safeguards built into the non-delegated channel which are geared to help an emerging banker.
In contrast, while delegated correspondents are also responsible for funding and delivery of the loan to the end investor, they take on the increased risk of underwriting and approval pursuant to agency guidelines and any investor overlays. Although this provides the correspondent with improved margins and control, warehouse bank providers also realize that there can be a heightened risk associated with the delegated channel.
If you are planning to grow from non-delegated to delegated delivery, ask upfront what the warehouse provider’s policies are for this type of transition and if there are any increased net worth requirements to be aware of.
As mentioned previously, whether you are a delegated or non-delegated lender, it is always best practice to optimize your investor set so that you have multiple outlets for each loan product being funded with your warehouse line. This will allow you to mitigate risk and help protect your business from the unforeseeable.
Please tune in next time where we will continue to expand into more details during part three of our series on what questions a mortgage lender should be asking their warehouse bank.
Now, wouldn’t it be nice if there was a blueprint available that would walk you through the steps on how to climb the mortgage banker ladder!
Well, that is where we step in to help with our practical expertise and understanding of the process from mortgage licensing, investor approval, warehouse bank selection, third party fulfilment providers, E&O and Surety bond companies, origination strategies, coaching, consulting, and more!
You can simply use our online scheduler to select a convenient consultation time and let us show you the Path to Prosperity!
Sean A. Stephens, Esq., CMB®
Broker to Banker Consulting, LLC
SeanS@BrokerToBankerConsulting.com
Call/Text: (714) 844-7146
Toll Free: (866) 989-0564 Ext. 419
Sean A. Stephens, Esq., CMB®
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