- Mark Madsen
- May 15, 2014
Net funding is the temporary holding back or “netting” out of identified amounts relative to the loan amount. In other words, it is a temporary offset of amounts that will be paid to or on behalf of one party by the other party when funds are advanced or exchanged. For example; For a given $200,000 loan, the charges and prepaid interest payable the mortgage originator total $2,000. FirstFunding would “net out” the $2,000 from the loan amount and send $198,000 ($200,000 -$2,000 = $198,000) to settlement agent for closing. The originator does not lose the $2,000. The netted $2,000 is counted toward the haircut required by FirstFunding and the originator receives the $2,000 (plus any premium) when the subject loan was sold to an investor in the secondary market.