Flagstar Bancorp, one of the nation's biggest lenders to mortgage providers, has stopped funding most new home loans without government backing.
The move, announced to its customers on Friday, deprives the housing market of one of the country's 10 largest so-called warehouse lenders. Other lenders that make nontraditional mortgages to households will no longer be able to borrow from Troy, Mich.-based Flagstar to originate those home loans. Those who borrow from Flagstar to make larger government-backed mortgages will be able to get only 95% of the mortgage amount.
"This change is driven by declining market conditions and in no way reflects Flagstar's ability to fund our customers' warehouse lines," bank spokesperson Susan E. Bergesen said in an emailed statement. "We remain as committed as ever to our warehouse customers and to this business."
The change affects transactions in which lenders haven't already locked in a commitment by Flagstar. It covers new originations of non-qualified mortgages, which are basically loans given to borrowers whose checkered financial records make them ineligible for government-backed mortgages; as well as jumbo loans — or those whose sizes exceed limits set by federal authorities.
Flagstar had $4.8 billion in warehouse lines to mortgage lenders at the end of last year, filings show. It processed around $55 billion of warehouse advances last year.
Non-qualified mortgages are a small part of the nation's housing market, but they’ve been growing. Last year, lenders bundled about $25 billion of these loans into bonds. Angel Oak Capital Advisors expects the market to double this year.
