The warehouse lender, at this stage, perfects a security interest in the mortgage note to serve as collateral.
The International Finance Corporation has set up warehouse lines of credit around the world and has developed a guide on how they work.
The warehouse lenders in most cases provide the loan for a period of fifteen to sixty days.
[5] The difference is related to when the loan originator gets his funds with respect to the time at which the real estate transaction takes place.
An important risk management function of warehouse lending is fraud detection and deterrence.
Measures that the warehouse lender can take to limit fraud can be a strong screening process for mortgage banking companies, making sure the loan originator itself has a strong internal screening process, limiting the amount available for 'wet funding,' and requiring that all payment proceeds come through the warehouse lender first from the end purchaser of the mortgage loan held for resale.