Warehouse Lines of Credit Law and Legal Definition
A warehouse line of credit is a revolving line of credit system where a mortgage banker arranges loan from a warehouse lender. Banks use warehouse line of credit to finance a borrower's temporary ownership of long-term assets such as mortgages. The original note from the loan is kept by the warehouse lender. Subsidiary documents are kept with the mortgage banker.
Warehouse Lines of Credit is a short-term revolving credit facility. The credit facility starts with the mortgage banker taking a loan application from the property buyer. The loan originator secures a permanent investor to whom the loan will be sold. The mortgage banker draws down the line of credit to fund a mortgage and sends the loan documentation to a warehouse credit providing institution. The line of credit is paid off, when the loan is finally sold to a permanent investor. Warehouse funding allows the loan originators to provide mortgages at more competitive rates. Warehouse line of credit makes mortgage loan market more accessible to property buyers. Moreover, loan originators earn more profit from origination fees than from interest rate.
