Purpose
Reasons for using a warehouse line of credit include:
- Permanent Funding: Mortgage lender does not have to draw deposits - the line of credit provides permanent funding for the life of all loans in the program.
- Less Risk: No margin calls - once the asset is funded, there is no additional mark-to-market and posting of collateral.
- Unlimited Loan Volume: Warehouse line of credit program can fund an unlimited loan volume. This enables specialty lenders to enlarge their portfolios for maximum interest income and eliminates the need to manage multiple sources of capital.
In addition, in this way the warehouse credit institution can manage an exposure to mortgage loans market without building a branch network of its own.
Read more about this topic: Warehouse Line Of Credit
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