Questions about warehouse lines of credit
Here's a few basic questions and answers about warehouse lines of credit.
What is a Warehouse Line of Credit?
One definition of a warehouse line of credit would be, a secured OR unsecured line of credit that an individual or insitutional funding source can draw upon to purchase notes and real estate.
You can think of it as a credit card with a very large limit and every time a note or piece of property is purchased with the line of credit (credit card) the balance is taken out of the total available credit and needs to be paid back with interest.
Who can apply for Warehouse lines of Credit?
Any mortgage originator (broker or banker) who is engaged full-time in residential mortgage loan origination, has successfully developed a relationship with and sold loans to at least one takeout investor and can meet certain minimum net worth and industry experience criteria.
How does a Warehouse Line of Credit work?
The mortgage loan is originated and underwritten to investor standards based on sound QC procedures, then it is delivered to the Warehouse Lender in exchange for funding the closing of the mortgage note. A Warehouse Line is a Credit Line used to fund loans at the closing table. After the investor wires funds to the Warehouse Lender to purchase the loan, an accounting is done to reconcile the cost and fees for the line, and then the proceeds including the Service Release Premium are forwarded into the account of the Mortgage Banker. The note is carried or housed on the Warehouse Line for a period of time (usually 7 to 21 days) until it is called for delivery to the investor. As a Mortgage Banker with a Warehouse line you will be involved in a close relationship with the Warehouser and you will be responsible for many closing and logistical functions. You must deliver closed loans to your investor. The process of moving notes on and off the line is called the monthly flow. The payoffs must be calculated, the wires or checks must be made, and the exceptions and problems must be reconciled in order to take the loan off the line and deliver the loan to the investor. Those loans must be funded and shipped along with the closing documents and delivered to Escrow and the Warehouser.
What types of Warehouse Lines are there?
Affinity lines are essentially Warehouse programs that investors provide to their key originators. There are basically two types of Warehouse lines; Affinity lines and Non direct lines. Affinity lines may have slightly lower costs and provide ways to pass on rebates. These Affinity lines provide for the funding of loans to that particular Investor and generally only a handful of other Investors. You may be charged a premium if you are allowed to place other loans on your line to be sold to other Investors, which limits your flexibility. However, you may be limited to the product types allowed on the line and you may be required to place a certain percentage of business with the provider of the line or be subject to additional fees. Most of these lines have a 1 to 5% haircut that requires you to have to come up with some of your own funds in order to close each loan. These Non-directed lines tend to operate with greater flexibility. Non direct lines are pure Warehouse credit facilities. You may have the ability to do third party origination’s (wholesale) and bulk loans on certain types of lines. You generally have more choices with the investors used, the time spent on the line and the number of product types available to fund on the line. Non-directed lines tend to operate more efficiently, although they may cost slightly more. This ability is very important to originators of Sub Prime product.
How do I get a Warehouse Line?
You should ask your wholesale reps, read industry periodicals, consult with industry professionals and search the Internet for viable choices. There are over 30 institutions offering Warehouse Lines of Credit for Mortgage Brokers and Bankers. The road to finding and choosing the right Warehouse Lender has many twists and turns but if you are determined and prepared it has many benefits that can make the journey well worthwhile. Contact the MBSD group today about getting a Warehouse Line of Credit.
What is a Warehouse Line of Credit?
One definition of a warehouse line of credit would be, a secured OR unsecured line of credit that an individual or insitutional funding source can draw upon to purchase notes and real estate.
You can think of it as a credit card with a very large limit and every time a note or piece of property is purchased with the line of credit (credit card) the balance is taken out of the total available credit and needs to be paid back with interest.
Who can apply for Warehouse lines of Credit?
Any mortgage originator (broker or banker) who is engaged full-time in residential mortgage loan origination, has successfully developed a relationship with and sold loans to at least one takeout investor and can meet certain minimum net worth and industry experience criteria.
How does a Warehouse Line of Credit work?
The mortgage loan is originated and underwritten to investor standards based on sound QC procedures, then it is delivered to the Warehouse Lender in exchange for funding the closing of the mortgage note. A Warehouse Line is a Credit Line used to fund loans at the closing table. After the investor wires funds to the Warehouse Lender to purchase the loan, an accounting is done to reconcile the cost and fees for the line, and then the proceeds including the Service Release Premium are forwarded into the account of the Mortgage Banker. The note is carried or housed on the Warehouse Line for a period of time (usually 7 to 21 days) until it is called for delivery to the investor. As a Mortgage Banker with a Warehouse line you will be involved in a close relationship with the Warehouser and you will be responsible for many closing and logistical functions. You must deliver closed loans to your investor. The process of moving notes on and off the line is called the monthly flow. The payoffs must be calculated, the wires or checks must be made, and the exceptions and problems must be reconciled in order to take the loan off the line and deliver the loan to the investor. Those loans must be funded and shipped along with the closing documents and delivered to Escrow and the Warehouser.
What types of Warehouse Lines are there?
Affinity lines are essentially Warehouse programs that investors provide to their key originators. There are basically two types of Warehouse lines; Affinity lines and Non direct lines. Affinity lines may have slightly lower costs and provide ways to pass on rebates. These Affinity lines provide for the funding of loans to that particular Investor and generally only a handful of other Investors. You may be charged a premium if you are allowed to place other loans on your line to be sold to other Investors, which limits your flexibility. However, you may be limited to the product types allowed on the line and you may be required to place a certain percentage of business with the provider of the line or be subject to additional fees. Most of these lines have a 1 to 5% haircut that requires you to have to come up with some of your own funds in order to close each loan. These Non-directed lines tend to operate with greater flexibility. Non direct lines are pure Warehouse credit facilities. You may have the ability to do third party origination’s (wholesale) and bulk loans on certain types of lines. You generally have more choices with the investors used, the time spent on the line and the number of product types available to fund on the line. Non-directed lines tend to operate more efficiently, although they may cost slightly more. This ability is very important to originators of Sub Prime product.
How do I get a Warehouse Line?
You should ask your wholesale reps, read industry periodicals, consult with industry professionals and search the Internet for viable choices. There are over 30 institutions offering Warehouse Lines of Credit for Mortgage Brokers and Bankers. The road to finding and choosing the right Warehouse Lender has many twists and turns but if you are determined and prepared it has many benefits that can make the journey well worthwhile. Contact the MBSD group today about getting a Warehouse Line of Credit.
posted by Bill at 9:20 PM
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