What Is Table Funding in Mortgage & How Does It Work?
Understand table funding: a mortgage process explaining how loan funds are directly provided at closing.
Mortgage funding involves various methods to provide borrowers with the necessary capital for property acquisition. These processes ensure that funds are available when a real estate transaction concludes, facilitating the transfer of ownership. This article explores table funding, a specific mechanism where a loan is funded at the time of closing. It will detail how this process works, the steps involved, and the roles of the various individuals and entities participating in such transactions.
Understanding Table Funding
Table funding is a mortgage financing method where a mortgage broker originates a loan, but a third-party lender provides the funds directly at the loan closing. This arrangement allows the broker to facilitate the loan without using their own capital to fund the transaction. The core concept involves a simultaneous advance of loan funds and an immediate assignment of the loan to the entity providing those funds. This differs from a traditional broker role where the broker simply arranges a loan that the lender then closes and funds directly.
The primary purpose of table funding is to enhance efficiency for mortgage brokers and ensure immediate funding for the borrower. Brokers can offer a wider range of loan products and close deals more quickly by not needing to hold capital themselves. This method enables brokers to appear as the direct lender to the borrower, even though the actual capital comes from another source. This arrangement streamlines the process, benefiting all parties involved by reducing delays in accessing capital for real estate transactions.
The Mechanics of Table Funding
The mechanics of a table-funded mortgage transaction primarily unfold at the closing table, where several actions occur simultaneously. The mortgage broker brings the borrower and the complete loan package to the closing. All necessary documentation, including the promissory note and the mortgage or deed of trust, is prepared for execution.
At the time of closing, the funding lender directly provides the loan funds to the borrower, or more commonly, to the escrow or title agent. This immediate transfer of funds is why the process is often referred to as “wet funding.” Concurrently with the disbursement of funds, the loan documents are executed in the name of the funding lender. In some cases, the originating broker may initially be named as the lender, but an immediate assignment of the loan to the funding lender occurs at closing.
This simultaneous funding and assignment ensures that the loan is immediately recorded on the books of the funding lender. The funding lender assumes ownership and servicing responsibility for the loan after the transaction is complete. This streamlined process avoids delays if the loan had to be funded by the originating entity and then later sold to an investor.
Key Participants in Table Funding
Several distinct parties play specific roles in a table-funded mortgage transaction. The borrower is the individual or entity seeking the mortgage loan to finance a property purchase. Their role involves applying for the loan, providing necessary documentation, and receiving the funds at closing.
The mortgage broker is responsible for originating the loan, which includes taking the application, assisting the borrower through qualification, and preparing the loan package. While the broker handles the client relationship and paperwork, they do not provide the actual loan funds. Their compensation typically comes from fees and commissions for facilitating the loan.
The funding lender is the financial institution or investor that supplies the capital for the loan at closing. This entity becomes the initial holder of the mortgage and the party to whom the borrower makes payments. They underwrite the loan and ensure it meets their criteria before funding.
Other parties, such as the title company or escrow agent, facilitate the transaction by handling the legal transfer of property and the disbursement of funds. They ensure all documents are properly executed, recorded, and that funds are distributed to the correct parties, like the seller or existing lienholders. Their involvement ensures the closing process is compliant and orderly.