?What is table funding?

Question

From the reading I've done, it sounds like table funding occurs when the source of loan origination money is different than the that of the lender named in the note/deed of trust documents. Is that basically it, or am I oversimplifying things?

Also, I've heard table funding is illegal in CA, is that true everywhere?

Verran Jones · Answer

David,

You are correct, Table Lending is a method employed when a loan originator does not have access to the money necessary to make loans and then hold them until it has enough to sell on the secondary market. As a result, the originator forms a relationship with a lender who provides the funds for closing and immediately takes an assignment of the loan. David, however, under regulations of the Department of Housing and Urban Development, table-funded loans must disclose service release premiums—profit received by the originator—on the loan closing settlement statement. Loans sold on the secondary market do not have to make those disclosures. This is huge.

Secondly, I would check with the Real Estate Settlement Procedures Act ("RESPA")               and HUD's implementing regulations regarding the state this practice is still accepted.

verran

Bill Gulley · Answer

That's kinda correct, originators don't "hold" loans, originators that work on an affiliate basis or as a brokerage originate the loan, the loan is usually prepared by the lender buying the note at par. As mentioned any premiums paid or fees collected for origination must be disclosed and are limited by loan type. Banks may originate loans, they will initially fund the loan, then they block the loans and hold them until levels are reached or commitment dates met to sell are reached, or they could sell one note later on, but that's not funding at the table.

But table funding refers to the funds being provided at settlement from either the lender funding or buying the note at settlement, the originator doesn't do any funding.  Cash at the table provided under a brokerage or affiliate relationship by someone other than the originator.. :)