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The Monoline Challenge

Monoline-Lenders“Support monoline lenders” is the mantra of many in the mortgage broker business. Unfortunately, that’s getting harder to do.

Many (not all) monolines are now posting rates that are 15-20+ basis points higher than what bank branches are quoting. And if you add credit unions to the mix, several monolines are completely out to lunch on pricing.

But base rates aren’t the only problem. We’re seeing many smaller lenders impose one or more of the following:

  • Rate premiums or insurance premiums on 75-80% loan-to-values
  • Rate premiums, insurance premiums or restrictions on rental properties
  • Rate premiums, insurance premiums or restrictions on condos
  • Rate premiums or restrictions on pre-approvals (or they’ve halted them altogether).

And non-bank lenders, with the exception of MCAP, still can’t get funding for HELOCs—a product sought by 36% of mortgage consumers.1

Yet, despite all these hurdles, some broker-only lenders still expect funding commitments upwards of $10-20+ million for brokers to qualify for their top “status” pricing. That would be like Sony selling only high-priced 20-inch LCDs and expecting TV retailers to meet normal sales targets.

Many of the restrictions and the mediocre pricing stem from investors (funders) who buy or securitize the mortgages that monolines originate. Those funders are increasingly risk-averse and regulatory-constrained.

One can feel for lenders who must rely on funding sources that barely keep them competitive. What a luxury to be a well-capitalized, self-sufficient, deposit-taking lender.

1 Source: CAAMP

Sidebar:  Banks have been imposing a slew of restrictions themselves in recent quarters. But they still maintain far greater pricing power and product breadth than non-bank lenders.

Rob McLister, CMT