Quarterly report pursuant to Section 13 or 15(d)

Warehouse Lines of Credit

v3.22.2.2
Warehouse Lines of Credit
9 Months Ended
Sep. 30, 2022
Warehouse Lines of Credit  
Warehouse Lines of Credit

Note 8. Warehouse Lines of Credit

Encompass Lending Group (“Encompass”), an indirect wholly owned subsidiary of the Company, utilizes line of credit facilities as a means of temporarily financing mortgage loans pending their sale. The underlying warehouse lines of credit agreements, as described below, contain financial and other debt covenants.

Encompass maintains a master loan warehouse agreement with a bank whereby Encompass borrows funds to finance the origination or purchase of eligible loans. Interest on funds borrowed is equal to the greater of the 30-Day Secured Overnight Financing Rate (SOFR) rate plus 2.625% or 3.50%. The agreement expires in July 2023. The maximum funding available under these loans at September 30, 2022 and December 31, 2021 was $15.0 million. At September 30, 2022 and December 31, 2021, the outstanding balance on this warehouse line was approximately $2.1 million and $4.3 million, respectively. As of September 30, 2022, Encompass was in compliance with the debt covenants under this facility.

Encompass maintains a mortgage participation purchase agreement with a bank whereby Encompass borrows funds to finance the origination or purchase of eligible loans. Interest on funds borrowed is equal to the greater of the London Inter-Bank Offered Rate (Libor) Rate plus 2.00% or 3.5%. The agreement expires in April 2023.The maximum funding available under these loans at September 30, 2022 and December 31, 2021 was $25.0 million. At September 30, 2022 and December 31, 2021, the outstanding balance on this warehouse line was approximately $3.3 million and $3.1 million, respectively. As of September 30, 2022, Encompass was not in compliance with certain of these debt covenants related to earnings, however, based on communications with the bank, Encompass has received a waiver on these covenants.

Encompass maintains a warehousing credit and security agreement with a bank whereby Encompass borrows funds to finance the origination of eligible mortgage loans. Interest on funds borrowed is equal to the greater of the daily adjusting Bloomberg Short-Term Bank Yield (BSBY) rate plus 2.00% or 3.5% per annum. The agreement expires in September 2023. The daily adjusting BSBY rate plus 2.00% as of September 30, 2022 was 5.10% and the daily adjusting LIBOR plus 2.00% as of December 31, 2021 was 2.09%. The maximum funding available under these loans at September 30, 2022 and December 31, 2021 was $15.0 million. At September 30, 2022 and December 31, 2021, the outstanding balance on this warehouse line was approximately $3.1 million and $2.2 million, respectively. As of September 30, 2022, Encompass was in compliance with the debt covenants under this facility.