Warehouse Line Operations

Outsource Management and Operational Support

Titan Lenders Corp

http://titanlenderscorp.com

Warehouse Line Lending

Warehouse lines of credit are real estate secured short-term lines of credit that
allow mortgage bankers to fund loans into the secondary market until the loans
are purchased by the end institutional investors. The funding source, (the
"Warehouse Lender or Bank"), generally offers the necessary funds through a
revolving purchase agreement to a mortgage banking company for funding
mortgages at closing. All of the loans are pre-sold in the secondary market to
large institutional investors, many of which are New York Stock Exchange listed
companies. The warehouse line funding covers approximately a 15 to 30 day
period between loan closing and the sale of the loans to the end institutional
investor.
Interest is paid on each transaction on the number of days the warehouse lender
holds the mortgage loan, from the original funding date to the date the funds are
received from the mortgage purchaser. The rate charged is Wall Street Prime or
Libor plus a negotiated margin as well as a per transaction fee to cover
administrative and other related expenses including the wire fee, overnight
deliveries, and the custodial fee.

Current Warehouse Lending Market

According to current estimates, the capacity in warehouse lending
has shrunk from nearly $200 billion in 2007 to a mere $20 billion
today through exposure to toxic loans, fraud, repurchase demand
and basic market flight.
Warehouse Lending Capacity
250
200

200

150

Volume in Billions

115
100
50

20

0
2007

2008

2009

Current Warehouse Lending Market

From the previous data, one can see that there is a need for
increased capacity. Major lenders have left most of these business
channels as they focus on their own retail origination, paring
mortgage operations. This has opened substantive opportunities
for community banks, securities firms and other non-traditional
sources to offer warehouse lending capacity in a climate of
decreased risk, higher margins and emphasis on quality
production. These institutions participation is seen as integral to
an economic recovery through the housing market.
Read more about proposed solutions to the
warehouse line liquidity crisis here.

Risk Mitigation
Product Risk: A primary reason behind the collapse of the major
warehouse lenders over the past two years have been the toxic loans
with their contingent repurchase demands from low performance, early
payment default and fraud. Most of their major lending partners were
entirely built on these loans and when the collapse began went out of
business leaving the warehouse lenders with little or no recourse for
recovery. Today, the mortgage market is characterized by very limited
product offerings of the most traditional and conservative varieties.
Most loans are either Agency or Government, and even these have seen
dramatically enhanced underwriting standards. For the warehouse
lender, the lack of competition has created a market climate that is risk
averse, which definitely works in their favor.
Titan manages warehouse lending for only the most risk adverse loans
Agency, Government and Rural/Bond loans. While we have participated
in hard money operations, we will not manage the warehouse lending
aspect of such loans.

Risk Mitigation
Takeout Risk: Warehouse lenders, once permissive of aging loans,
can no longer afford the risk of loans not purchased in a timely
manner. Takeout risk can be managed in this market through due
diligence with regards to compliance, fraud and quality loan
production. Titan often requires its correspondent partners to employ
our closing and post-closing services to mitigate takeout loss, ensure
swift salability and leverage Titans reps and warrants.
Fraud checks Interthinx, Corelogic
Compliance checks TILA/HOEPA/ROR/STATE CONSUMER/FNMA POINTS &
FEES Mavent, Compliance Ease This ensures that loans are not un-salable
due to errors in compliance.
Closing and Post-Closing Titan Fulfillment Reducing risk of closing errors
that might make loans unsalable on the secondary.
Titan Experience Should lenders refuse to purchase or fail to honor a
commitment to purchase, Titan has a broad base of experience in quickly
repackaging loans for sale within the current market or as scratch and dent.

Risk Mitigation
Fraud: There is no way to entirely insulate against fraud. However,
several requirements, including the financials of the originating lender,
help to mitigate losses associated with fraud. Titan manages the process
flow required by the warehouse lending institution to ensure that every
opportunity to mitigate fraud is optimized.
Borrower fraud The most insidious form of fraud; it can be mitigated through
the application of reasonable fraud checks through national vendors. Titan
requires that all loans funded under our reps and warrants evidence some
recognized fraud check.
Settlement fraud A more subtle fraud that requires the warehouse line to
ensure that the Closing Protection Letter, Errors and Omissions and Master CPL
are confirmed and verified with a major title underwriter. Titan requires
background checks on agent attorney and maintenance of approved settlement
agent lists. In escrow states, verification of funding to the title agent (not the
escrow agent) is required. Additional due diligence is performed to ensure that
there are no illegal affiliations or pre-existing relationships between the agent
performing disbursement and the originator or borrower.

Experience
Titan offers a broad knowledge of the mortgage market,
from escrow states to attorney states to wet funding states.
This provides a unique opportunity for the warehouse
lender to capitalize on the safest market opportunities
without requiring regional operations to manage the
complexity of the market. Titans foundation of delivering
safe, quality, compliant loans to the secondary provides a
unique warehouse lending experience for the originator,
allowing common sense flexibility to be weighed against
the known risks and hazards of a changing market.

About Titan
Residential mortgage lending is a unique business model - complex, multi-faceted, and dynamic, to
be sure. Equally, it is error-prone, repetitive, and laden with paperwork and intricate details. Cyclic
by nature, the mercurial demand of and for home loans can tax lender operations to their limits.
Promising mortgage businesses sometimes fail to realize their potential because they have not built
elasticity and scalability into their processes.
At particular risk is the proper execution of closing and post closing functions that are pivotal for
maintaining loan profitability throughout its lifecycle. When a lender tries to manage more volume
than its back office processes and expertise can support, quality lending practices are compromised.
Risk multiplies. Mistakes and delays interrupt workflow. Profits are lost. Critical business relationships
endangered.
Titan Lenders Corp meets mortgage lenders and community financial institutions need for industry
expertise, elasticity, and scalability. We provide closing services, mortgage post closing, and
other back-end loan processing services to correspondent, wholesale, and retail residential
mortgage lenders. Our experience in these markets has created natural vertical integrations
into warehouse lending management, as well as banking and REO operations.
Unlike many firms offering outsource mortgage services; we are an American business operating in
the continental U.S. Our values include exemplary customer service, process management, and webbased technology. Our mission is to serve, support, and dominate mortgage back-office
fulfillment in the residential lending industry on a national level.

Warehouse Lending Process

Flow

Projections
In general, warehouse lenders traditionally earn approximately
250-375 basis points on their money. Using an outsourced
option for their operations, capital requirements for overhead,
technology and personnel are very limited. Titan offers a variable
cost option of per unit fees to be netted out of disbursement to
the correspondent lender. As a direct per file cost to the lender of
$125-155 per unit depending on volume, the lender and the
warehouse lender are able to scale their business model based on
opportunity rather than capital requirements.
Correspondent File Flow Chart:

Why Titan?
Titan provides a wide variety of operational expertise for both the primary and
secondary mortgage market. As such, we have a very unique perspective on
the requirements of investors to purchase loans, how to forestall salability
issues, clarify process and procedures necessary to avoid repurchase, fraud
and errors in production effecting salability and take corrective measures
quickly and efficiently should the worst case scenario happen. We
understand the needs of the warehouse lender, the originator, the investor
and the regulator.
Titan has not worked with a single stand-alone warehouse lender that
operates under these specific parameters with the breadth of experience to
understand both the primary and secondary markets. With a variable cost
model and embedded technology, banks, credit unions or securities firms can
enter the market without huge investment in infrastructure. They can also
pilot programs on a smaller scale, taking their capital to market in a very
structured, process driven environment. When these processes are refined
and perfected, our clients can scale up, down, regionally, nationally,
conforming or niche.

More Information About Warehouse

Line Lending
Contact

Ruth Lee
Vice President
www.titanlenderscorp.com
720.279.7279
5353 West Dartmouth Avenue
Suite LL50
Denver CO 80227
Ruth.lee@titanlendercorp.com

-------------------------------------------------For additional questions, customized pro-forma or Visio process

flow please contact Ruth Lee.