What is Net Funding and why is it used by FirstFunding?

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.