Part 3 – What questions should a mortgage lender ask their warehouse bank?
How many warehouse lines does a mortgage banker need?
What questions should a mortgage lender ask their warehouse bank?
As a quick recap, 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. Last week, in Part 2, I then provided 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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What questions should a mortgage lender be asking their warehouse bank?
- How many warehouse lines should have you have?
This is one of the most common questions I receive. As you can imagine, there is not a one size fits all type of answer. First off, you have to review your own internal production metrics.
For example, are you producing in a high-cost area where loan amounts are significantly larger or in a region where loan amounts are smaller and you are focused on units? Will the warehouse line cover just your personal production or do you have multiple branches and MLOs to consider? Once you are able to determine the volume metrics, then you can back into how much warehouse capacity you need.
However, even if one warehouse line could fulfill your volume requirements, like lenders, warehouse lenders have overlays as well. For example, as recently discussed, the exit of Sprout and FGMC created havoc in the Non-QM space which also includes warehouse line providers. If you are funding Non-QM loans or any type of specialty product, it is good practice to have multiple warehouse lines in order to absorb any overlays that may be put into place by one vs. another.
Another example of this occurred at the onset of Covid-19 in 2020 where warehouse lines were placing arbitrary minimum credit score cutoffs. One warehouse line could have had 650 while another may have 640 or yet another may have had no minimum overlays at all. Having alternative options is always a top priority!
- What warehouse lending system will be utilized?
Make sure to find out what type of system your warehouse bank is utilizing on the bank end. Ask to see if they can provide you with a demonstration of the reporting features? Are there any built-in efficiencies that will help your day-to-day workflows? For example, will it provide 1098 year-end reporting options?
For example, if you need to create reports for loan benchmarking or financials (both audited and unaudited) how easy is it to navigate?
- How will the mortgage banker get paid once a loan has been purchased?
First off, prepare to have a separate bank account through the warehouse line. This could be termed an operating account or a pledge account. It may require that maintain a certain account balance or no minimum balance – make sure to check on these types of details!
Once a loan has been purchased, the warehouse bank will deposit proceeds into the account. However, if you are utilizing a separate operating account for your banking (i.e., one outside of your warehouse bank), make sure to find out in the beginning how you will be able to move the funds from the warehouse bank established bank account to your company’s main operating account. Will they allow for wires, transfers, ACH, etc.?
Also, will the warehouse line bank account allow you to link to any online accounting software? This provides the mortgage banker with that added efficiency to delegate the financial and account aspects to a third party by providing them authorized accounts to access the accounting software real time.
Moreover, you can then take the next step and use these connections to automate and build out your loan benchmarking models which are critical tools to help maximize revenue by understanding your true costs per loan.
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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