How Warehouse Lending Works for Mortgage Originators

Warehouse lending is a crucial aspect of the mortgage industry, providing mortgage originators with the necessary funds to originate and fund various types of mortgage loans, such as conventional, FHA, and VA loans. Warehouse lenders like Customers Bank are financial institutions that provide short-term funding to mortgage originators, allowing them to close and fund loans before selling them to permanent investors. This type of lending is essential for mortgage originators as it helps them maintain a steady flow of funds to continue their operations.

Customers Bank, a nationally recognized warehouse lender, offers a diverse range of credit facilities, from $5 million to $300 million. This guide will empower you to unlock the potential of this innovative financing solution, tailored to meet your specific needs.

The Process of Warehouse Lending

The warehouse lending process starts with a mortgage originator submitting a loan application to the warehouse lender. The warehouse lender then evaluates the application based on various factors, such as the borrower’s creditworthiness, property value, and loan-to-value ratio. Once the loan is approved, the warehouse lender provides the mortgage originator with a line of credit. This line of credit acts as a revolving fund, which means that as the mortgage originator repays the line of credit, the funds become available again for the originator to draw from to fund new loans.

The mortgage originator can now use the line of credit to fund and close the loan. After closing, the mortgage originator sells the loan to a permanent investor, such as a government-sponsored or private investor. Once the loan is sold, the mortgage originator repays the line of credit provided by the warehouse lender. This repayment replenishes the line of credit, allowing the mortgage originator to fund new loans.

Warehouse lenders typically charge interest on the line of credit provided to mortgage originators. The interest rate charged is usually based on an index, such as the prime rate, plus a spread that reflects the risk associated with the loans. The interest charged on the line of credit accrues daily based on the outstanding balance.

In addition to interest charges, warehouse lenders may impose certain fees on mortgage originators. These fees may include administration fees for managing the line of credit, wire transfer fees for transferring funds, and collateral review fees for assessing the value of the collateral. These fees help offset the costs incurred by warehouse lenders in providing and managing the line of credit.

Benefits of Warehouse Lending

Warehouse lending offers several benefits for mortgage originators. First and foremost, it enables them to access funds quickly and efficiently, ensuring prompt closure and funding of loans. This is particularly crucial in a competitive market where borrowers expect rapid turnaround times. Secondly, warehouse lending empowers mortgage originators to manage their loan portfolios effectively. They can fund loans before selling them, allowing them to seize market opportunities and maximize profitability with confidence.

Key Takeaways

Warehouse lending plays a vital role in the mortgage industry by providing mortgage originators with short-term funding to originate and fund loans. This allows them to streamline the loan origination process and ultimately provide better mortgage options to borrowers. Customers Bank’s expert warehouse lenders will answer your questions, help you apply, and get you started. Contact our team today.