What is Warehouse Lending?
Warehouse lending is credit provided to a mortgage lender to fund mortgages until the lender sells them in the secondary market.
How Does Warehouse Lending Work?
Let's say John Doe goes to Bank XYZ to borrow $200,000 to buy a house. Bank XYZ gives him the loan, but it does not lend him its own money. It borrows the money from a warehouse lender. Two weeks later, when Bank XYZ sells the mortgage to another lender, it receives cash that it uses to repay the warehouse lender. Bank XYZ profits by earning points and origination fees.
Why Does Warehouse Lending Matter?
Warehouse lending helps banks make mortgage loans, especially small- and medium-size banks that prefer to make their money from origination fees and the sale of the loans rather than earning interest and servicing the loan for 30 years.
Often, warehouse lenders require banks to provide collateral, which is usually the bank's marketable securities and the loan documentation proving that it made the loan and will sell it.
Personalized Financial Plans for an Uncertain Market
In today’s uncertain market, investors are looking for answers to help them grow and protect their savings. So we partnered with Vanguard Advisers -- one of the most trusted names in finance -- to offer you a financial plan built to withstand a variety of market and economic conditions. A Vanguard advisor will craft your customized plan and then manage your savings, giving you more confidence to help you meet your goals. Click here to get started.
