Between the time when mortgages are originated, and the end of the month when they are securitized, the assets are waiting in limbo. The originating finance company will eventually recoup its total outlays when the pool is securitized. Meanwhile, by issuing commercial paper, it can cover about 98% of its loans.

For many years, mortgage originators funded the warehouse period through reverse repurchase (repo) agreements. Broker dealers, however, could quickly pull lines of credit at the least hint of trouble, leaving originators vulnerable. As a consequence, mortgage originators have always been open to other financing options.

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