Today Fannie Mae announced a $1 BILLION warehouse facility to NattyMac (a.k.a. Guggenheim Partners). This ‘guarantee facility’ will be further broken down by NattyMac to smaller mortgage bankers in the form of additional warehouse lines of credit to fund residential mortgage loans.
This is the beginning of a green-shoot form of grassroots lending base in the residential market. Just as most of the new jobs in a recovery are created by small and mid-sized companies, these new warehouse funds will spring new loan programs from the base of the residential housing finance market.
When I worked for a large bank, a superior once told me “we don’t innovate new loan programs here a XXX Big Bank, we buy innovators”. My boss’ boss encouraged me to go to a smaller bank and innovate, then the big bank would simply come and buy us once we proved out our theories.
And so it is in economic rebirth. The true innovation will come from garages, not well financed R&D complexes. Radical shifts often come out of the obscure corners. Green shoots are best watered at the roots.
Fannie might have been better to extend the loan guarantees directly to the smaller lenders, instead of putting NattyMac in the middle, but a Billion Dollars is a lot to go around when you break it into $1,000,000 warehouse lines. Small companies can use this money most effectively.
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