Mortgage Grapevine

Warehouse line renewal change

Are all warehouse lender switching their base computation?

Have a few months left before old line expires and I was surprised by calculation of the base rate that’s being proposed. Gone is the old LIBOR plus “x”. Replacement is the “adjusted LIBOR rate” – LIBOR divided by 1 minus the WAREHOUSE BANK’S reserve requirement under Reg D. Obviously we have no control of the reserve requirement and seems like a stealthy way to bump up the LIBOR base.

Not thrilled but if “everyone’s doing it” in this big bank era, it’s not worth running around trying to find a new bank. Any suggested warehouse folks? Suppose the alternative is numerous ASAPs each month.

by c-f-s January 21, 2013 3:27 PM


by carlos123 January 21, 2013 6:27 PM


I think we have discussed what a sweet deal you have in the past. We are still using the one month Libor rate, or the banks Prime rate as the base. Most lenders have a floor rate that is higher than Libor plus "x".
by YATI January 22, 2013 10:53 AM

Prime rate as a base would be a bitch. Again ASAP which varies to an effective rate around 1.8%.

They’re wavering on this adjusted LIBOR. When asked what the adjusted LIBOR would be today, the bank balked and said “we don’t enforce that anyway.” So retire is from the verbiage.

Should be fun next couple of months!

by c-f-s January 22, 2013 3:09 PM


We are obviously from different sides of the tracks. Hopefully we get a chance to talk in person some day. I think we operate in two different worlds. The absolute best rate I compete against is Libor Plus 2.75% with no floor. Most have a floor and the best floor rate I have run into is 3.5%

You actually have a positive spread. That is unheard of in my world these days.

by YATI January 22, 2013 4:29 PM

This is the implied rate between the discount on the ASAP transaction and the ultimate price at normal settlement. OUR WAREHOUSE RATE IS HIGHER but not that much so we do some ASAP and some regular deliveries. ASAP does not offer all the desire coupon rates at all times but this should be a tacit open to you.
by c-f-s January 22, 2013 6:04 PM


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