MBA To Agencies: Reconsider Capital Rules For Warehouse Lines

Mortgage Bankers Association (MBA) President and CEO John A. Courson has sent a letter to Federal Reserve Chairman Ben Bernanke, Federal Deposite Insurance Corp. Chairwoman Sheila Bair, Comptroller of the Currency John Dugan and Acting Director of the Office of Thrift Supervision Scott Polakoff asking them to reconsider the risk-based capital rules related to warehouse lines of credit for real estate financing.

In the last two years, warehouse lending capacity has been dramatically reduced, from $200 billion in 2007 to between $20 billion and $25 billion today. Independent mortgage bankers, who represent 40% of mortgage origination capacity, rely on warehouse funding to close their loans. Without adequate warehouse credit, they are unable to serve their customers, the MBA stresses.

The MBA has formally requested the agencies study the current risk weightings for warehouse lines and make changes to better reflect the risk associated with Fannie Mae-, Freddie Mac- or Ginnie Mae-eligible loans and related servicing advances, the letter says. The proposal does not extend to other single-family loan types (e.g., non-agency subprime or Alt-A loans), Courson adds.

SOURCE: Mortgage Bankers Association


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