Margin call
A margin call is a warehouse or repo lender’s demand for cash or more collateral when the value of pledged loans, times the advance rate, falls below what the borrower owes on the line.
How a margin call works
Many warehouse lines are documented as master repurchase agreements that let the provider mark pledged loans to market. Federal Reserve researchers explain the trigger: if the market value of the loans times the advance rate is less than the repurchase obligation, the provider can make a margin call, which “must usually be resolved within 24 hours,” either with cash or by delivering more loans. They also note that loans aging on the line can lead to margin calls.
Values can fall for reasons the lender does not control: rising rates, a weaker property market, a delinquent borrower or a provider’s own revaluation.
Why it matters to a private lender
Margin calls arrive when markets are stressed, which is when cash is hardest to find. The same research describes how mark-to-market collateral requirements in other markets have made financing conditions worsen with market conditions, contributing to runs and margin spirals. A private lender with thin liquidity can be forced to sell loans at a discount or inject owner cash at the worst moment.
Example
Hypothetical. A lender owes $3,000,000 on loans valued at $4,000,000 with a 75% advance rate. The provider marks the loans down to $3,600,000; 75% of that is $2,700,000, so the provider can call for $300,000 in cash or extra collateral.
Whole-loan funding at closing has no margin calls; compare the options on the warehouse line alternative page.
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.