Warehouse Lending is a specialized form of credit offered by banks and large non-bank lenders (Warehouse Lenders) to companies involved in the mortgage banking industry. These lines are used to fund mortgage loans that borrowers use to purchase property. The mortgage loan is then sold into the secondary market, either directly or through a securitization and the draw on the line is repaid. Dwell time, consisting of the time the warehouse lender holds the loan prior to it being sold to the investor (secondary market) is usually 2 to 15 days, but may be longer. Warehouse lenders advance a percentage against the mortgage loan, typically 96% - 99% (if the warehouse provider is also the investor the advance is 100% with no discount), forcing the mortgage banker to provide some of its own capital. If the dwell time is too long, the warehouse lender may force the mortgage banker to pay back the advance with their own funds.
There are two forms of funding in warehouse lending, wet funding and dry funding. Under wet funding the mortgage loan provider get its funds at the loan closing, but prior to the documentation being submitted to the warehouse lender. Under dry funding, the mortgage loan provider receives and reviews the mortgage loan documents prior to releasing the funds.
Wet Funding has higher fraud risk for the warehouse lender. Accordingly, the warehouse lenders needs to complete due diligence on the mortgage banker and on its systems and processes. Technology has reduced processing time and cost, and improved accuracy.
Warehouse Lending Flow Chart
by Barry Epstein
This chart was prepared by Barry Epstein, Founder of the Mortgage Warehouse. Contact Barry at email@example.com
Barry Epstein is a senior executive with extensive bank experience as a chief lending officer in the residential mortgage and asset based lending sector, including warehouse lending on a regional and national basis. He is the Managing Director of Mortgage Warehouse Network, LLC.
CIC Mortgage Credit, Inc. - CIC Credit has been a leader in mortgage credit reporting since 1992. In addition to single bureau infiles, dual merged credit reports, and trimerge credit reports, they offer a number of credit related services including: rapid rescoring, tax return verifications, Fannie Mae and Freddie Mac credit reports, credit score improvement tools, mortgage fraud and identity theft protection, flood zone certifications, and AVM products.
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Street Resource Group's Warehouse Loan System provides online, real-time connectivity between the mortgage warehouse and originators with complete loan level accounting control, collateral tracking, risk management and reporting features. The SRG
Warehouse Loan System provides the benefits of a rich and comprehensive feature set continuously designed and developed since 1994. In 2006, SRG was a finalist for the Mortgage Technology Magazine Steve Fraser award, and in both 2007 and 2008 was included in the “Top 50 Best and Brightest Mortgage Technology Providers”. - SRG Warehouse Loan System Overview
Mortgage Bankers Association is
is the national association representing the entire real estate finance industry.
Ellie Mae® is a leading provider of enterprise level, on-demand automated solutions for the residential mortgage industry. Encompass360®, serves as the core operating system for mortgage originators. DataTrac is a mortgage management software system.
ProLender - The Paperless Lending System allows lenders to create end-to-end solutions that streamlines the mortgage origination process.
Titan Lenders Corp - Titan provides unique, intelligent lending solutions for Banks, Correspondents Lenders, Credit Unions, Housing Finance Agencies, Servicers, Warehouse Lenders, and more.
Stone Hill Group - The StoneHill Group offers domestic mortgage outsourcing and consulting services to the mortgage, banking, credit union and financial industries.
Guardian Mortgage Documents - Guardian Mortgage Documents (GMD) specializes in providing document preparation and delivery, automated management workflow and fully customized outsourced closing and post-closing solutions to the national financial services industry.
MGIC - MGIC (www.mgic.com), the principal subsidiary of MGIC Investment Corporation, is the nation's largest private mortgage insurer as measured by $159.5 billion primary insurance in force covering 1.0 million mortgages as of March 31, 2013.
CreditPlus - is a privately held firm with headquarters in Salisbury, Md., Credit Plus serves more than 6,500 mortgage company customers across the country.
Doc Magic - Founded in 1988, Document Systems, Inc. is the largest loan document production company in the U.S