Warehouse line
A warehouse line is a revolving credit facility that lends a lender part of each loan it originates, secured by the loans themselves, and is repaid when each loan pays off or is sold.
How a warehouse line works
The lender closes a loan, pledges it to the warehouse provider and draws the advance: the loan balance minus a haircut, which the lender funds itself. When the loan pays off or is sold to an investor, the proceeds repay the advance and that capacity can be used again. Federal Reserve researchers describe these facilities in detail for mortgage companies, including haircuts, mark-to-market margin calls, covenants and 364-day terms that renew each year.
What providers usually require
Terms vary by provider, but expect financial covenants (net worth, liquidity, profitability), an origination and loss track record, financial statements, eligibility rules for each loan, dwell-time limits and personal guarantees from the owners.
Does it fit private and hard money lenders?
Often not. Many bank warehouse programs are built for agency and other residential mortgages that are sold within weeks. One bank’s published program, for example, lists bridge and construction loans as ineligible collateral, states that it does not finance hard money or fix-and-flip loans, and requires personal guarantees from anyone owning 10% or more of the company. Specialty lenders do finance private loans, usually with lower advance rates, tighter eligibility and higher pricing than agency lines.
Compare it with the alternatives on the warehouse line alternative page.
Sources
- Kim, Laufer, Pence, Stanton and Wallace, “Liquidity Crises in the Mortgage Market,” Federal Reserve Board FEDS 2018-016 (warehouse line mechanics: haircuts, margin calls, covenants, guarantees, 364-day terms)
- Simmons Bank, Warehouse Lending (an example bank program: lists bridge and construction loans as ineligible, does not finance hard money or fix-and-flip loans, and requires personal guarantees from 10% owners)
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.