In real estate finance, warehousing refers to the practice of a lender, such as a mortgage company, depositing newly originated loans with a bank or other financial institution prior to selling them on the secondary market. During this period, the mortgage company borrows against these loans to obtain interim funding.
Warehousing allows the lender to accumulate a block of loans for sale as a package or to time the market in anticipation of more favorable pricing. For example, a lender may delay selling the loans if it believes discount rates are declining and that the loans can be sold later at a higher price.
