Dwell time
Dwell time is how long a loan stays pledged on a warehouse line before it is paid off, sold or removed. Lines usually cap it, and a loan that ages past the limit can lose its advance or have to come off the line.
How dwell time works
Warehouse lines were built for lenders that originate loans and sell them within weeks. To keep the line revolving, providers limit how long each loan may stay pledged: the dwell time or aging limit. Past the limit, the agreement may step down the advance rate, require the lender to pay down (curtail) part of the advance, or require the loan to be removed. The Office of the Comptroller of the Currency’s mortgage banking handbook discusses aging reports as a standard part of managing warehouse and pipeline risk, and bank programs typically set the maximum dwell time in the line approval.
Why private lenders feel it more
Mortgage bankers sell loans quickly. Private and hard money lenders often hold bridge, fix-and-flip and construction loans until the borrower repays, which can be six to eighteen months or more. Every month a loan sits on the line costs interest, and a loan that outlives the dwell limit can force the lender to find cash at the worst time, for example when a borrower asks for an extension.
Example
Hypothetical. A 12-month bridge loan goes on a line with a 180-day dwell limit. At day 180 the lender must pay down the advance or move the loan, so the funding plan has to cover the second six months from somewhere else.
Model the interest cost of dwell time in the warehouse line cost calculator.
Where Lender Capital fits
Lender Capital places first-lien, business-purpose real estate loans with capital partners. You apply once, then submit each loan with the full file. We send it only to capital partners whose criteria it fits, one partner funds the whole loan at closing and it is assigned to them. You keep your points (less the placement fee), earn the spread above the partner’s rate and service the loan. You pay a placement fee only when a loan funds.
Lender Capital is a business-to-business platform. This page is general information, not legal, tax or securities advice. Terms of warehouse lines and other funding sources vary by provider; confirm them with each provider and your counsel.