Pacific Mercantile Bank has decided to leave the wholesale mortgage market in California, according to this press release. The reason given is that the bank is going to focus on the commercial lending side of the business. Mortage loans that are still part of the commercial side of the house will be done and they will not be sold on the secondary market.
Why get out when the real estate market is white hot in California? I suspect several things. First banks are being forced to be a lot more creative in terms of financing options. We are seeing 40 year loans, zero interest loans and a whole host of ARMs. This competitive pressure forces a bank on the wholesale side to innovate more and be more flexible in the types of mortgage products produced. For a smaller institution this can be quite difficult as they lack the manpower to market and develop new products. Or it can be a portent of something else; a vendor side stepping the coming California real estate pop.
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