Warehouse Lending

Warehouse lending is an example of line of credit. This line of credit is extended by a financial institution to the loan issuer or loan originator. The main objective of this line of credit is that the loan originator must fund the mortgage that is being used by the borrower to purchase a certain property. The life of the loan may be short or it may be long depending upon the duration of the loan. The typical duration of the loan starts from the day it is originated and ends on the day when it is sold to the secondary market. The loan can be sold in the secondary market either by lending or by securitization any of the two methods can be used.

The repay of the loan by the loan originator to the warehouse lender depends upon the eventual sale of the loan. This is the reason the warehouse lender closely monitors the loans and the originator of the loan right from the origination of the loan to its sale in the secondary market. The loan progression is monitored so that the warehouse lenders can ask for eventual repay of the loan. There are several methods to ensure the repayment of the loans that are made through the process of the warehouse lending. Most of the warehouse lenders typically require a small charge of each transaction as well as at the point when the originator  post collateral.

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