New
York
- The potential collapse of Colonial BancGroup poses another hazard to the
still shaky housing market.
The Southern regional bank, based in Montgomery, Ala., is the largest remaining player in warehouse
lending, which provides short-term financing to independent mortgage
bankers.
At one time, these mortgage bankers originated half of all U.S. home loans using these
funds. Today, the warehouse lending market is
decimated. In 2007 it was worth an estimated $200
billion; now there is just $25 billion available - 25% of which belongs to
Colonial. If Colonial fails, those funds become even more
scarce. Colonial’s problems escalated two weeks ago after the bank announced a $606 million second quarter loss and said it had
substantial doubt that it could survive without fresh capital from an outside
source.
