A short-term revolving facility that funds loans a lender originates and intends to sell, secured by those loans until they are purchased by the takeout investor.
The longer version
The warehouse lender advances against closed loans held for sale, and the collateral turns over constantly. Each loan goes on the line, sits for a short period, and comes off when the takeout investor funds. Because the collateral is the loan file itself, the custodian arrangement and the completeness of that file drive how much the lender will advance.
Files with missing documents sit on the line longer and can become ineligible, which turns a document problem into a funding cost. That is why warehouse operations track collateral exceptions with more urgency than most closing teams track their own checklists.
Common questions
- What collateral secures a warehouse line?
- The originated loans themselves, usually the note, the mortgage, the assignment, and the supporting file, held by a custodian on the warehouse lender's behalf.
- What is a collateral exception on a warehouse line?
- A missing or defective document in a loan file on the line. Exceptions carry a cure period, and an uncured exception can make the loan ineligible, forcing a paydown.
- How long does a loan stay on the line?
- Only as long as it takes the takeout investor to purchase it, commonly a few weeks. The dwell time is a direct cost, so file completeness at closing has a measurable effect.