Warehouse Line

Warehouse line (also called a warehouse line of credit or warehouse facility) is a revolving credit facility designed to fund mortgage loan acquisitions on a short-term basis. The lender advances capital against specific loans being purchased, using the notes themselves as collateral. As the borrower resolves, resells, or refinances those loans, the proceeds pay down the line — freeing up capacity to fund the next acquisition. This revolving structure allows note investors and mortgage companies to maintain continuous buying power without tying up all of their own capital.

Warehouse lines are a primary tool for scaling a note investing operation beyond what an investor's cash reserves alone would support. By leveraging a warehouse facility, a pool buyer can acquire larger loan pools and deploy capital across more assets simultaneously. The cost of the facility — typically structured as a floating interest rate plus fees — must be factored into the investor's return calculations, since the spread between the warehouse line's cost of capital and the yield on the acquired notes determines whether the leverage is accretive or dilutive to overall returns. Warehouse lines require disciplined portfolio management: if resolution timelines extend beyond projections, the carrying costs erode margins and the lender may issue margin calls or reduce the facility's advance rate.