First Funding Blog


The differential between the amount of good funds needed to close a subject loan and the warehouse lender’s maximum advance. It is important to understand that a shortage is not the same as “Haircut.” A Shortage occurs when the amount of good funds needed by the settlement agent to close and disburse proceeds on a loan, after offsetting all amounts payable to the mortgage originator shown on the settlement statement. For example, on a $200,000 loan, if the warehouse lender’s maximum advance amount is $198,000 (99%), and the total of the originator’s settlement statement fees equals $500, the Shortage would equal $1,500 so that the settlement agent has sufficient funds to fully disburse the subject loan ($198,000 +$500+$1,500= $200,000). Shortages must generally be provided as good funds to the settlement agent.