What does warehousing in home mortgage lending refer to?

Warehousing in home mortgage lending specifically refers to short-term loans made by commercial banks to mortgage bankers. This process allows mortgage bankers to fund the origination of mortgage loans before they are sold to investors in the secondary market. Essentially, these short-term loans act as a bridge, providing the necessary liquidity for mortgage bankers to close loans quickly while waiting for the opportunity to sell those loans and receive reimbursement.

When commercial banks extend this type of line of credit, they enable mortgage bankers to maintain a steady flow of operations, ensuring that they can continue to issue new mortgages. Once the mortgage loans have been sold in the secondary market, the mortgage bankers can repay the warehousing loans to the commercial banks. This mechanism helps stabilize the lending process and ensures that borrowers can access financing in a timely manner.

The other options reflect different aspects of mortgage lending but do not capture the concept of warehousing. Long-term loans by lenders and funding through government programs refer to different financing strategies, while investment in real estate describes action taken after obtaining financing rather than the warehousing concept itself.