MBA NewsLink Q&A: SitusAMC’s Rich Berg on Addressing Unique Challenges Faced by Warehouse Lenders

Rich Berg is senior director of warehouse and custodial technology at SitusAMC, a provider of solutions supporting the complete life cycle of real estate finance. He oversees the ProMerit & WLS Warehouse Lending Systems, the industry’s leading warehouse technology solutions with over a 75% share of the warehouse lending market.

Berg has over 20 years of experience in warehouse lending and was chief product and development officer at MBMS Inc. prior to SitusAMC’s acquisition of the company.

MBA NEWSLINK: What do you see as some of the biggest challenges for warehouse lenders?

RICH BERG, SITUSAMC: Probably the biggest challenges right now are the cost of funds, spreads, pricing, and staffing. The housing market is at a low now—in fact, it hasn’t been this low in a while. Because rates are so high, it’s been difficult for warehouse lenders to find business and to make the economics work.

Staffing has become a particular challenge, as managing workforce demands in a fluctuating environment is always complex. The broader banking industry’s instability, including liquidity issues and increased regulatory scrutiny, has placed extra pressure on warehouse lenders as well. Dealing with the demands of those situations when you have people to manage internally, and with the ups and downs of the market, have made the current landscape quite challenging for warehouse lenders.

MBA NEWSLINK: How are warehouse lenders dealing with this tough market?

BERG: Warehouse lenders are all handling it differently based on their size, area of business focus, and other factors. But overall, most have taken a proactive approach and have been engaging more directly with their clients and prospective clients to reinforce the essential role they play in the lending ecosystem. The aim there is to persuade their clients that they should either be utilizing their warehouse partners more or focusing on certain products that enable them to maximize their impact and returns.

However, this strategy comes with its own set of challenges, the biggest of which is differentiation. Getting clients to choose you over another warehouse lender is a major hurdle. In this environment, success is not just about providing funds, but conveying your value in a way that resonates with what clients currently need. In this sense, the technologies warehouse lenders use and the third-party vendors they rely on are playing a critical role in terms of how well they can perform.

MBA NEWSLINK: What are your thoughts on meeting those challenges?

BERG: For us, it’s important to work with clients from a technology-centric approach and ensure they have everything they need to navigate this landscape while increasing efficiency. That includes ensuring our clients can eliminate any unnecessary or unknown issues that pop up from a risk perspective.

For example, cloud-based warehouse technology has become pivotal in today’s market, as they provide warehouse lenders with enhanced security, efficiency, and greater agility to adapt to market shifts. Also, with the rise in cyber threats and wire fraud, being able to integrate specialized fraud prevention technology into their workflows has become crucial. These tools not only help reduce losses and reputational risk, but also streamline the risk management process and bolster overall compliance.

Ultimately, these types of technologies can help warehouse lenders focus more on their strategic operations instead of being bogged down by manual tasks and concerns over security and risk. As with most things, it’s all about having the right tools.

MBA NEWSLINK: What kinds of challenges are your clients facing?

BERG: Our clients are grappling with a myriad of challenges. Many are faced with layoffs, which is a harsh reality in the current economic climate. At the same time, they’re tasked with finding ways to improve efficiency and risk management and lower costs. That’s just difficult, especially when you’re also dealing with rising interest rates, which have increased the cost of funds and led to tighter spreads and more competitive pricing. Nobody wants to have those conversations; nobody wants to want to have to look at things that way. But when you’re in a down cycle, that’s how it goes.

We’re finding that clients who lean into technology solutions are faring much better than their competition. Leveraging robust and adaptable technology has always been a competitive advantage for warehouse lenders, but it is absolutely essential for overcoming today’s challenges while positioning themselves for future success.

MBA NEWSLINK: No doubt the industry in general has challenges. How do you think it should be handled from a business services or operational perspective?

BERG: From the services side of it, the key should be flexibility, particularly when it comes to costs. By utilizing variable-cost solutions in particular, warehouse lenders are better able manage expenses, whether the market continues to go down a bit or even if it comes back up. It’s something that a lot of warehouse lenders are finding enticing at the moment, so we’re having a lot of those conversations about it.

For example, variable-cost solutions can enable lenders to augment staff when demand increases and scale back when demand weakens without having fixed costs on their balance sheet all of the time. The same goes for their technology, which should always have a flexible pricing structure. Also, by deploying cloud-based technology, such as our ProMerit warehouse lending system, lenders can avoid hefty infrastructure costs, audits and updates while improving overall security.

(Views expressed in this article do not necessarily reflect policies of the Mortgage Bankers Association, nor do they connote an MBA endorsement of a specific company, product or service. MBA NewsLink welcomes your submissions. Inquiries can be sent to Editor Michael Tucker or Editorial Manager Anneliese Mahoney.)