Warehouse Lending Comes of Age

Warehouse lenders provide short-term financing to mortgage lenders selling loans into the secondary market. Characterized as short-term lines of real estate-secured credit, warehouse lines allow mortgage bankers to fund loans in the secondary market until purchased by institutional investors. * Initially this was a niche market representing a small number of lenders, funders and investors. However, the demand for warehouse lenders and advanced warehouse-lending platforms has rapidly increased in recent years due to the continued strength and growth of the mortgage industry and the increasing interest of investors in mortgage-backed securities (MBS). Additionally, mortgage bankers are relying more on warehouse lines to significantly impact profitability and increase their agility in the marketplace. * According to the Reynolds Group, Summit, New Jersey, a consulting firm that specializes in mortgage banking advisory services and provides data for evaluating warehouse business processes, warehouse lending represents one-third of origination volume. In 2005, total origination volume reached $2.8 trillion, according to the Mortgage Bankers Association.