Warehouse lending is a form of credit that can be used as a form of mortgage repayment, this can extend from origination until it is sold on the secondary market directly.
The lenders ensure that the borrowers ensure that the borrowers meet the necessary requirements by placing charges on each transaction in addiction to the charges when loan originators post collateral.
What you should know
- Warehouse lending is a way for banks provide loans without using it’s own capital
- Financial Institutions can provide warehouse lines of credit to mortgage lenders
- Transactions of funds from warehouse lender to creditor in secondary markets is handled and approved by a banks, In return banks receives finds from the creditor and payback to the warehouse lender making a profit by earning points and original fees
- Mortgage lenders depend on the sale of mortgage loans to repay financial institution as well as make profits.
Warehouse lending is an alternative way whereby banks or private lenders provide funds to borrowers without having to use their capital. Small banks will prefer to use warehouse lending to make money rather than earn interest in 30 year mortgage loan fee.
The duty of the bank is to approve the application. And then attain funds for the loan from a warehouse lender. Bank obtain funds when they sell mortgage to another creditor mostly in the lesser market and then pays the warehouse lender. Bank also benefits under this method in as much as they earn points and origination fees.
It is with knowing that warehouse lending is not the same as account receivable financing in the field of industry because the collateral involved in warehouse lending is more significant than account receivable financing.
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