rates. Unlike in other types of lending, loan originators earn more profit from origination fees rather than interest rate spread since the closed mortgage loan is sold quickly to an investor. The warehouse funding providing institution accepts various types of mortgage collateral, including subprime and equity loans, residential or commercial, including specialty property types. The warehouse lenders in most cases provide the loan for a period of fifteen to sixty days. Warehouse lines of credit are usually priced off 1-month LIBOR plus a spread. Also, warehouse lenders typically apply a 'haircut' to credit line advances meaning that only 98% - 99% of the face amount of loans are being funded by them; the originating lenders have to provide with the remainder from their own capital. Purpose Reasons for using a warehouse line of credit include: Permanent Funding: Mortgage lender does not have to draw deposits - the line of credit provides permanent funding for the life of all loans in the program. Less Risk: No margin calls - once the asset is funded, there is generally no additional mark-to-market and/or posting of additional collateral. In the event a loan exceeds dwell limit as described above, additional collateral may be required. Leverage: A Warehouse line of credit provides the mortgage banker with leverage. This leverage can be as high as 15:1. Leverage increases return by allowing a mortgage banker with relatively limited capital (compared to a traditional depository) to originate and sell far more mortgages than its capital would otherwise allow. This feature enables specialty lenders to maximize loan production revenue while minimizing their need to manage multiple sources of equity or other debt. In addition, the warehouse credit provider can manage exposure to the mortgage loan market without building a branch network of its own. Other information Warehouse lending can be differentiated between 'wet funding' and 'dry funding'. 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. During 'wet funding' the mortgage loan provider gets the funds at the same time as the loan is closed, i.e. before the loan documentation is sent to the warehouse credit provider. 'Dry funding' takes place when the warehouse credit provider gets the loan documentation for review before sending the funds. An important risk management function of warehouse lending is fraud detection and deterrence. The primary fraud risks