The two most common issues that make it difficult for the broker to obtain warehousing through traditional sources is that (i) brokers do not maintain the minimum net worth requirement of large warehouse lenders, (ii) brokers do not want to use a line that requires them to sell exclusively to a certain investor. These brokers need the training, assistance and follow through that we have been providing for years. Bank lending institutions familiar with mortgage lending discovered an opportunity to provide quality originators with credit facility secured by the underlying mortgage with rates of returns that were attractive to the banks.

The objective to both the warehouse lender and the mortgage company is to create a profitable business relationship. The warehouse lender can make secure loans approved and underwritten according to various agency guidelines, and the mortgage company will be able to make a profitable spread on each mortgage used by this warehouse line.

To make the warehouse lender secure, it must have three items:

1. A marketable first lien mortgage in which it can obtain unrestricted title.

2. The mortgage to be pre-sold to a permanent mortgage investor limiting the time exposure to the lender.

3. Complete control of the funds on the sale to the permanent investor.

The loans are approved prior to funding and specific closing instructions are given to the title companies instructing them to close the loan only when the mortgage is a first lien with a good and marketable title. In addition, prior to closing, the mortgage will be pre-sold with a written commitment in possession from an approved third party investor. After closing, the mortgage is sold to the permanent investor, and all monies from the sale will go directly to the warehouse lender for dispersal.

Under our current program, the warehouse lender will advance up to a maximum of 100% of the loan amounts which are to be purchased by third party companies or which are to be pooled.