I need some help/direction on Warehouse Mortgage Lending. I don't know enough about it to know exactly what questions to ask so, I need the elementary version. From how a warehouse line works to what are the risks associated with this type of lending. I am especially concerned about the potential disclosure & fair lending risk this may pose to the bank. Any insight would be most appreciated.

Basically:

The bank grants a mortgage lender a line of credit. The mortgage lender makes a loan and advances the line to fund the loan. Advances on the line are secured by the assignment of the mortgage note. The mortgage lender sells the mortgage, the proceeds pay down the line. The bank has no disclosure or fair lending exposure as they are not the lender on the loans.

Since the bank (we) is taking an assignment of the note, is it worthwhile to review the documentation that is being prepared by the mortgage lender to ensure it is compliant? Where I'm going with this is,if for some reason the mortgage lender cannot sell the loan, thus not being able to pay us off and we find that the TIL &/or other documentation is inaccurate, could that impact the bank's ability to collect? From a fair lending and reputation risk perspective, if the mortgage lender did anything that was unfair/unethical could the bank be held liable in anyway? I know this may be a stretch but with all the mortgage mess going on, just want to make sure we step cautiously into this type of activity.

I always appreciate your wisdom, thank you for your help.

I'm also very new to this warehouse lending, but we’re having difficulty determining where these loans get reported on the Call Report (currently we have them in RC-C Part I 4a)? Because these are bank business loans, but technically home mortgages, we want to make sure we are categorizing them correctly on the Call. Any advice?

Would it not be reported under RC-C 9 if you are just taking an assignment of the note?

Loans to nondepository financial institutions include:

(1) Loans (other than those that meet the definition of a “loan secured by real estate”) to real estate investment trusts and to mortgage companies that specialize in mortgage loan originations and warehousing or in mortgage loan servicing. (Exclude outright purchases of mortgages or similar instruments by the bank from such companies,

Thanks for your response. To confirm, would these then not be reported under CRA?

Sorry - CRA is not my thing

No problem ! Thank you for your responses.