March 26, 2014

Lenders could increase their loan sales as market conditions drive portfolio values higher

If current economic conditions send lenders' portfolio values higher, these banks could see an uptick in loan sale activity.

According to American Banker, originations have been falling lately as interest rates move higher. To compensate for this shortfall in the mortgage business, many lenders have become more liberal in terms of extending credit. Many mortgage companies have been forced to take such action, considering that a 20 percent drop in origination volume could put them in the red.

Mortgage companies first implemented more lenient requirements in 2013, when new Fed policies sent borrowing costs higher.

"Banks that are going to make money lending in the mortgage market are going to need to find other borrowers, so the natural progression is to move down the credit curve," James Frischling, president and co-founder of a New York-based financial advisory and consulting firm, told the news source.

Now could be a good time for lenders to capitalize on the opportunities this situation creates - as supply drops, their loan portfolios could appreciate. If these particular assets rise in value, banks might have more motivation to sell their holdings and lock in the associated gains.

In addition, certain mortgage companies are looking for strategic partners, while some banks are hoping to buy either origination platforms or whole loans. Either way, Garnet Capital Advisors can help complete these transactions.