Clients of warehouse lenders Guaranty Bank and National City (PNC) were called with the news today that they intend to exit their warehouse lending lines of business. Both banks intend to phase out their mortgage warehouse lending operations, taking the same non-renewal approach as client contracts expire over the next 12 to 18 months.

Guaranty Bank reportedly has $1.1 billion in outstanding commitments. With National City's $4.3 billion, the two banks comprise an estimated 27% of all warehouse lending volume still in existence -- and a huge blow to non-depository lenders who rely on these lines-of-credit to fund loans for their clientele.

Calls to representatives from both banks were not immediately returned. Stay tuned as additional details become available.

Even as we hear of calls to have TARP extended to cover this area of lending and reports of community banks entering the market, it may come as too little too late for non-bank mortgage lenders. The belt of restrictions on liquidity just grew two notches tighter.

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