Mortgage Warehousing

Some lenders want huge dollars packages of mortgages. One reason is that they might wish large packages in order to issue mortgage-backed securities. At other times, mortgage bankers might be speculating on falling interest rates which means the bankers will have a great deal of their own funds and borrowed funds tied up in loans.

Mortgage bankers borrow from commercial banks using their mortgage inventory to obtain additional capital for loans (loans secured by other loans are collaterally secured). There is a risk in mortgage warehousing in a movement of interest rates contrary to expectations. If rates fail, the mortgage banker would have a large inventory of loans which has to be sold at a price that could not only wipe out profits but be a financial loss.

Conforming Loans

Some mortgage companies makes only conforming loans. They sell to savings and loans, thrifts and other lenders who want to readily resell the loans should a sale be desirable.

Nonconforming Loans

Mortgage bankers will only make a nonconforming loan when they either have a buyer for such a loan or know that a resale will not create a problem. Examples of such loans would be larger residential loans which exceed Fannie Mae and Freddie Mac maximums.

Multiple Lenders

Mortgage bankers will at times put together large commercial loans as either the lender of loan arranger which is divided among several lenders. Sometimes the reason for such a loan is sheer size. Many lenders would shy away from a billion dollar commercial loan for a new mall, but they might like a piece of the action because of the desirable interest rate.

Mortgage bankers are often able to put together a consortium of lenders to handle such a loan. Another multiple-lender loan is a piggyback loan, where a single loan is divided into parts and the parts have varying degrees of risk. As an example, assume a million dollar loan is sought on a project valued at $1.3 million. One lender might agree to take $700,000 of the loan as the bottom portion at 9 1/2 percent interest. A second lender might agree to take the top portion of the loan ($300,000) at 12 1/2 percent interest. It is like a first and second trust deed written as a single loan. The second lender is subordinated to the first lender.

The top home lenders are the perfect people to meet every time you are looking for the perfect mortgage offer. You can find out more about home mortgage on several mortgage sites online.

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