Before you dive into that new warehouse line…
Things have been moving quickly for our industry over the past year. Even though warehouse and correspondent lending is a thriving niche, now is not the time to cut corners in your due diligence! Watch out for potentially fraudulent warehouse providers. If a pitch sounds too good to be true… then run away! Don’t just walk. I read recently about a company that charges 2% of a line with no loan fees and requires a minimum net worth of $50,000 with lines up to $10 million. To me, that’s mostly smoke and mirrors.
A few things to keep in mind…
- Captive lines often have poor back rooms. Some might even be illegal.
- Get lots of references on potential line providers. Never heard of them? Feel free to contact me, as I probably have.
- The most important thing to do is know your warehouse lender’s end investor approval process and get a current list of their approved take out investors.
- Talk to some of the lender’s existing clients.
- Look up the lender (on the Internet) to see if there are any negative comments.
- Find out about the lender’s approval process. If you are asked for a very large deposit, think twice about choosing the lender as your provider.
I’ve worked with many warehouse and correspondent lenders for many years. If nothing else, give me a call me any time and use me as a sounding board. It may save you thousands.