Mortgage Warehouse Line of Credit

What is a Mortgage Warehouse Line of Credit?
A mortgage warehouse line of credit is a short-term secured commercial line of credit extended to a mortgage banking company. The mortgage warehouse line of credit is secured by the mortgage loans the mortgage banking company originates. Funds are advanced into a checking account when the collateral package is received at the bank. When the ultimate take-out investor purchases the mortgage, the mortgage banking  company’s mortgage warehouse line of credit is reduced by the amount of the purchase price of the loan less interest and fees due the bank.

How is the Bank’s Mortgage Warehouse Line of Credit different from a traditional Mortgage Warehouse Line of Credit?
The Bank’s Mortgage Warehouse Line of Credit is a mortgage purchase and sale credit facility which operates similarly to a traditional mortgage warehouse line of credit. A mortgage purchase and sale credit facility purchases loans originated by a mortgage banking company and facilitates the sale to the ultimate take-out investor. Funding of the purchase by the bank takes place upon the delivery and approval of the mortgage collateral package. The mortgage banking company does not have to wait until the take-out investor calls for the loan. The mortgage banking company does not have to wait on the wire settlement from the take-out investor- funding desk. The bank wires funds directly to the settlement agent (usually a title company) with specific disbursement instructions.

Who would benefit from a Mortgage Warehouse Line of Credit?
If you are a mortgage banker you can benefit from a mortgage warehouse line of credit in several ways. You are exempt from disclosures of YSPs.  You can diversify your sources of warehouse funding, supplement your existing relationships, and if you combine mortgage warehouse line of credit with the bank's correspondent program, loans purchased under the correspondent program will not count toward your mortgage warehouse line of credit funding limitation. If you are contemplating the transition from a mortgage broker to a mortgage banker, a mortgage warehouse line of credit can provide you with a significant market advantage

The other benefits of a Mortgage Warehouse Line of Credit, in addition to being exempt from YSP disclosures, include:

Better Execution
Your loan funding ability increases since you are selling the loan to the bank immediately and are not waiting for an investor-funding department to accept your loans. In most cases, the bank funds loans within 24 hours of request.

Increased Market Reach and Penetration
Using the bank’s mortgage warehouse line of credit, you are operating as a mortgage banker. Mortgage transaction processing is accelerated and closing times are expedited. You will increase your ability to obtain and hold the top-tier loan representatives and realtors. Your ability to transact business faster, more efficiently, and with higher closing ratios enhances your reputation as a reliable professional.

Flexibility
The bank funds FHA, VA, Conventional, Jumbo, and Equity loans all with one facility. The bank offers mortgage warehouse lines of credit from $5MM to $50MM. Unlike some other mortgage warehouse lines of credit; your net worth does not solely determine your purchase limit. Advance rates are up to 100% on CLTV loans.

Maximize Your Control
You control the settlement and funding date of the loan closing. As a result, you are not subjected to the uncertainty experienced when working with wire funding from table lenders. The banks’ mortgage warehouse line of credit is a non-directed mortgage warehouse line of credit. Unlike Affinity lines or captive lines, you are not significantly restricted in the choice of the ultimate take-out investor. You have a number of take-out investors to choose from.

Increase Your Profitability
You retain the administrative fees and service release premiums with the bank’s mortgage warehouse line of credit. You also earn interest on each note, at the note rate, during the warehouse period. Your interest earnings typically make up for most or all of the interest that you are paying the bank during the transition of the loan to the ultimate take-out investor.

Why Change?
Many mortgage bankers become concerned when considering a change from their traditional method of mortgage processing to the use of a mortgage warehouse line of credit. Table funding loans is a process that works, and changing the company's process to use a mortgage warehouse line of credit introduces processes and procedures that are new. The bank believes that you will find that new is good in this case. The mortgage business has changed in recent years. The regulatory and economic environment has produced some unique and challenging conditions in the market. Your ability to quickly and efficiently process more mortgage transactions will provide you with a competitive advantage in the marketplace.