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   ARTICLE   |   From Scotsman Guide Residential Edition   |   November 2006

Find the Right Warehouse Fit

When making the broker-to-banker transition, ask questions to choose the proper warehouse lender

A number of mortgage brokers are deciding to make the transition from broker to banker. If you are one of them, you have probably spoken with industry professionals and your trusted advisers. You also likely have attended seminars and trade shows and read countless articles on how to make the switch.

The hard part, however, comes when you are ready to apply for your first warehouse line. How do you choose between so many different warehouse lenders?

This decision can impact your company for many years. The right warehouse lender can help your business succeed and grow. The wrong warehouse lender, on the other hand, can lead to aggravation and failure.

It’s not that any one warehouse lender is perfect and will lead to blissful loan closings. Each warehouse lender is slightly different and brings a different set of business philosophies and past experiences — good and bad — to the relationship. Therefore, your decision boils down to who is the best fit for you.

When considering how to choose a warehouse lender, it helps to first think about why your clients choose you as a broker. Is it because of your recent postcard? Is it your creative 1-800-number? Or is it because of the quality relationships you build and the expertise you offer?

It likely is a little bit of each, but it’s the relationship itself that will leave a long-lasting impression on your clients and that will help you gain referral business down the road. Your clients are looking for someone they can trust. It’s the same idea as choosing a warehouse lender — you want to find one with which you want to do business.

Weighing your options

All warehouse lenders are different. Certainly, they all fund loans for their customers each day. But that is often where the similarity ends. Some warehouse lenders are huge, with billions in commitments and hundreds of clients. Some are smaller with fewer customers.

Ask yourself where you will fit in best. Also ask your potential warehouse lender how many customers it has and what its average line amount is. You may decide being a little fish in a big pond is not for you, and you may want to opt for a smaller warehouse lender. On the other hand, you might find that one of the larger warehouse lenders meets your needs perfectly.

Some warehouse lenders will try to control your business. They may require you sell to their correspondent channel, or they may limit the number of investors to which you can sell. They may require you to use a specific software package or a particular vendor for services. Find out upfront.

In many cases, this directed business model may be the perfect fit for you. Some brokers like this controlled business model, while others like to make their own choices. Think about what works best for you.

You will find that some warehouse lenders are technologically advanced and that some are not. Some have many fees, and some have just a few. Different lenders may charge similar fees with different names, so don’t be fooled. Ask now to avoid surprises down the road. Make sure you understand your warehouse lenders’ pricing before you start, and make sure you are comparing apples to apples.

Some warehouse lenders only do A-paper, and some will fund almost any type of loan. Find out before you apply whether the product you are producing will be allowed on the warehouse line. Be sure to ask about funding loan products and any new markets you plan to add in the future, too. It may be a great fit today, but it’s important to think about your future funding plans.

Looking at support

The support a warehouse lender offers brokers who make the transition to banking is also essential to the relationship.

Find out how involved the warehouse lender’s relationship manager will be moving forward. Some warehouse lenders use a business model in which the relationship manager truly is a salesperson and will only handle the initial contact and application. This model forces you to deal with someone else for any day-to-day issues. It can make it difficult to establish a long-term, consultative relationship with your warehouse lender.

The most important issue to consider is how much help you can expect from the warehouse lender while you make the transition. Some may send you a manual to read, while some may train you through a conference call. Others will visit your office to meet with you and your staff face-to-face. You will have questions along the way, and some warehouse lenders specialize in helping brokers make the transition. Their entire staff will be trained to provide the service and support you need.

Some just claim they help with the transition because it looks good on their advertising pamphlets. Ask specific questions to make sure they can support their claims. Be careful and get the help you need.

•  •  •

No warehouse lender can be all things to all bankers. All have their own niches.

But the right warehouse lender is out there for you. You just should be willing to ask a lot of questions and to do enough research. The warehouse lenders should welcome your questions; after all, they benefit from finding the right clients, too.

The time you spend now will not be wasted. Go with the company that you feel will be the best fit. Good luck with your transition.


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