Warehousing
The practice of a lender holding completed mortgage loans in their portfolio rather than immediately selling them to investors or government agencies. This allows lenders to retain the interest income and servicing rights from the loans.
Example
“The credit union practiced warehousing by keeping the mortgages they originated on their books instead of selling them to investors.”
Memory Tip
Like storing boxes in a warehouse, lenders store loans in their portfolio instead of shipping them out.
Why It Matters
Warehousing affects loan availability and interest rates, as lenders must balance the risk and capital requirements of holding loans against the potential profits from selling them.
Common Misconception
Warehousing doesn't mean loans are stored indefinitely - most lenders eventually sell these loans but choose the timing strategically based on market conditions.
In Practice
A local bank might warehouse mortgages for six months before packaging and selling them to free up capital for new loans. During this period, borrowers still make payments to the original lender who retains the servicing rights.
Etymology
From the concept of storing goods in a warehouse, extended to mean lenders storing completed loans in their portfolio rather than selling them immediately.
Common Misspellings
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