“It’s a good problem to have.” I don’t know how many times we thought that over the last week. You see, the Baker Lindsey | Niceville Office (formerly Superior Home Loans) had a record month in June. In fact, it wasn’t just a record; we managed to close 69% more than our previous record set just the month before, in May. In fact, Baker Lindsey, Inc. as a whole closed more business in June than any month in their 28 year history! And they say there is a housing crisis?! Certainly what this last month did was expose the liquidity crisis as we’ve never seen before.
Baker Lindsey is a mortgage lender. We make our own underwriting decisions for all of our loans, and we fund the loans we approve with our own money. Because we’re not in the business of accepting mortgage payments long term (servicing loans) we sell the loans shortly after closing. This is a fantastic system that mortgage lenders from small to large have used for decades. Even huge mortgage lenders like Chase operate the same way often holding mortgages for a time period before selling them. We all operate basically the same way, just in different scale. Mortgage lenders use what are called “warehouse lines of credit” to fund loans; using them for a time period before they sell the loans to other entities.
The current financial conditions have led to a “liquidity crisis” that the country hasn’t seen for many years, if ever! Huge mortgage lenders like Chase Manhattan are having a difficult time purchasing the loans they have previously committed too. In other words if they have previously committed to close a loan for a borrower or purchase a loan from another lender, they are now having a difficult time gathering the cash necessary to quickly follow through on those commitments. Ultimately, if there is a delay in the lending system a “logjam” of sorts can occur. If a lender (like us) has a huge number of loans close at the same time other entities are experiencing difficulty purchasing loans (from us), they’ve got a mess on their hands. What’s been happening at some major lenders for months happened to Baker Lindsey last week! We reached our capacity to fund loans before we had funded all of our closings for June. Sort of like running out of money before the bills are paid. However, not only did all loans closed get funded (with only 2 transactions experiencing a funding delay) but we have been able to take steps to ensure we do everything possible to not run into this issue again as our business continues to experience tremendous growth.
Our solutions: To avoid this problem from recurring a growing lender must increase total capacity, or increase the efficiency at which they can turn over lines of credit. Baker Lindsey did both in the last 2 weeks. In a time when the nationwide warehouse lending industry has decreased from a $200 billion dollar business to a $25 billion dollar business, Baker Lindsey has actually increased their warehouse (funding) capacity by 50%. This takes solid financials in this day and time! At the same time Baker Lindsey has established relationships with several more companies to purchase their loans at a faster pace, which is also difficult to do these days unless your past performance has been exceptional.
In days like these it is the strong companies willing to adapt to constant change that will survive and thrive. Certainly a record breaking month for a 28 year old company is proof we are doing things right, even with the bumps along the way. Rest assured – your financing needs are best handled by Baker Lindsey!
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