What is table funding, and is it the same as wet funding?

What is table funding?

Table funding is a way of closing a loan in which the name on the loan and the source of the money are different. A mortgage broker or smaller originator closes the loan in its own name, and another lender, often called the funder, advances the loan amount and takes an assignment of the note and mortgage at that same closing.

The borrower signs a note payable to the originator. The money comes from the funder. By the end of the closing the funder owns the loan, and the originator has been paid for arranging it, not for selling an asset it held.

The definition ties the funder’s advance to the assignment, not to the minute the borrower signs. That is why table funding and wet funding are different ideas.

The table funding mortgage definition, in the regulation’s words

The legal definition sits in Regulation X, which implements the Real Estate Settlement Procedures Act (RESPA), at 12 CFR 1024.2(b). Four definitions there work together, and the third decides who counts as the lender.

• Table funding: “a settlement at which a loan is funded by a contemporaneous advance of loan funds and an assignment of the loan to the person advancing the funds. A table-funded transaction is not a secondary market transaction.”
• Mortgage broker: an intermediary between a borrower and a lender, other than a lender’s employee, “including such a person that closes the loan in its own name in a table-funded transaction.”
• Lender: generally the secured creditor named in the debt obligation, but “for loans originated by a mortgage broker that closes a federally related mortgage loan in its own name in a table funding transaction, the lender is the person to whom the obligation is initially assigned at or after settlement.”
• Settlement: the process of executing the legally binding documents, which “may also be called ‘closing’ or ‘escrow’ in different jurisdictions.”

How the CFPB treats a table-funding broker

Under RESPA, the party named on the note is still a mortgage broker, and the funder is the lender. The definition dates from HUD’s version of Regulation X, and the Consumer Financial Protection Bureau (CFPB) carried it over when it republished the rule, effective December 30, 2011.

The CFPB’s position is that labels do not decide this; the money does. Its July 2014 policy guidance on brokers restructuring as “mini-correspondent” lenders says RESPA’s broker compensation requirements do not apply to bona fide secondary market sales but do apply to table-funded transactions, and that a sale is bona fide depending on “the real source of funding” and “the real interest of the funding lender,” the test in 12 CFR 1024.5(b)(7). What the funder pays the broker is broker compensation, not the price of a loan sale.

Under the Truth in Lending Act the same party wears two hats. Regulation Z makes the party to whom the note is initially payable the creditor, even if the note is assigned at the same moment (comment 2(a)(17)(i)-2). And 12 CFR 1026.36(a)(1) also treats that creditor as a loan originator, subject to the compensation rules, if it does not fund the loan from its own resources, such as a bona fide warehouse line or its deposits.

A table-funded mortgage, step by step

Take a $400,000 purchase with a $320,000 loan. The funder approves the file, and the closing documents name the originator as the lender.

• At the signing: the borrower signs a $320,000 note payable to the originator, and the originator assigns the note and mortgage to the funder as part of the same settlement.
• Funding: the funder sends $320,000 to the closing agent. The $80,000 down payment and the closing costs come from the borrower.
• Disbursement: once the closing agent holds the funder’s money and the borrower’s, it pays the seller and the other charges.
• After closing: the funder owns the loan, and the borrower pays the funder or its servicer, not the originator.

What table funding is not

Three things get called table funding that are not. The test is whose money is at risk between the closing and any later sale.

• A lender funding from its own warehouse line and selling later. Regulation X’s own example, an originator funding with its own money or a warehouse line it is liable for and selling the loan afterward, is a secondary market transaction (12 CFR part 1024, appendix B, illustration 5).
• A direct lender lending its own capital. Its name is on the note and its money funds the loan. No assignment happens at the table.
• Wet funding. That is about timing: the lender’s money is at the closing when the documents are signed. A direct lender can wet fund, and a table-funded loan can fund after a review.

Table funding vs wet funding

The two terms answer different questions. Table funding answers whose name the loan closes in and whose money funds it. Wet and dry funding answer when that money arrives.

Wet funding means the lender’s money is at the closing when the documents are signed, so the closing agent can pay out that day. Dry funding means the signed documents go back to the lender for review before the money goes to escrow; published guides commonly put that gap at one to a few business days, with the next business day the usual case.

• Direct loan, wet funding: the lender named on the note has its own money at the signing.
• Direct loan, dry funding: the lender named on the note funds after its review.
• Table-funded loan, wet funding: the funder’s money is at the signing, and the assignment happens at the table.
• Table-funded loan, dry funding: the funder’s money and the assignment both follow its review.

Why people confuse table funding and wet funding

Because the phrase sounds like timing. “On the table” suggests money present at the signing, and many people in the business use it exactly that way.

One California lender’s explainer says wet or table funding means funds are available at the signing, “on the table, or while the ink is still wet.” A Florida title company calls table funding “a specific form of wet funding.” A Los Angeles brokerage tells buyers a loan can fund on the signing day only if the lender can “table fund.”

As slang, that is harmless. It is not the regulatory meaning. When a regulation, a contract or a lawyer uses the term, assume the 12 CFR 1024.2 meaning; when a loan officer says it, ask which one they mean.

What is a wet closing?

A wet closing is a closing where the documents are signed, the lender’s money is disbursed and the sale is completed in one sitting. The seller is paid on the closing day or within a day or two, and the buyer leaves as the owner.

Wet closing and wet funding generally mean the same thing. Most states generally close this way, including Florida, where the lender’s money is normally with the closing agent when the parties sign.

Lender conditions have to be cleared before the table, because nothing that would hold up the money is reviewed after the signing.

What is a dry closing?

A dry closing is a closing where the documents are signed but no money is disbursed at the signing. The signed package goes to the lender, the lender reviews it, and the money follows, usually the next business day and sometimes two or three days later if conditions need more review.

The term is used in two ways. In a dry funding state it is simply the normal process. In a wet funding state it is an exception: the parties agree to sign while the money is delayed, for example because a lender condition is still open or a wire missed the bank’s cut-off.

Either way, the deal is not done at the signing: the lender funds, then the deed records, then the seller is paid.

Wet closing vs dry closing: what changes for you

Neither is better in itself. A dry closing gives the lender a last look at the signed package before its money moves. A wet closing gives the seller, and anyone repaid out of the sale, certainty on the day.

• When the seller is paid: wet, on the closing day or shortly after; dry, after the lender funds and the deed records.
• When lender conditions are cleared: wet, before the signing; dry, the last ones can be cleared after the signing, before the money moves.
• When you can count on the deal: wet, at the end of the closing; dry, when the lender funds.
• What to schedule around: wet, the signing and the wire cut-offs; dry, the lender’s funding time and the county recording schedule.

Is California a table funding state?

Not in the sense the question usually means. California is generally listed as a dry funding state. Published California escrow timelines agree on the order (sign, then the lender reviews and wires, then the deed records) and put signing and recording one to three days apart.

That is a statement about timing. Whether a California loan can close in a broker’s name with another lender’s money is a separate question, and the answer turns on the type of license involved.

• California Financing Law: the license application in the state’s regulations (10 CCR 1422) says that when loans secured by real property are sold to institutional investors, the source of funds must exclude advances from an investor committed to buying the note, and that “the practice commonly known as ‘table funding’ is not permitted under the California Financing Law.”
• Real Estate Law: a real estate licensee who negotiates a loan secured by a trust deed must record it naming the lender, “who shall not be the licensee or the licensee’s nominee,” before funds are disbursed unless the lender authorizes earlier release (Business and Professions Code section 10234(a)). The Department of Real Estate’s compliance manual calls recording in the licensee’s name “so-called table funding.” A narrow exception for certain institutional lenders does not reach a dwelling or unimproved land (section 10234(d)).
• Practitioners disagree on the summary: one California law firm writes that table funding is legal in the state subject to licensing, another lawyer that California prohibits it. For a specific loan, ask California counsel.

What table funding means for an investor’s own loan

Most loans to real estate investors are business-purpose credit, which RESPA and Regulation X exempt (12 CFR 1024.5(b)(2)); Regulation Z, for example, treats credit to buy or improve a rental the owner does not occupy as business purpose (comment 3(a)-4). So the federal definition and the broker rules built on it generally do not govern an investor loan.

The structure still exists in private lending. Capital providers publish table funding programs for fix and flip, bridge, rental and ground up construction loans, in which the originator’s name is on the borrower-facing documents and the capital provider wires the money at closing and takes the loan.

• The money depends on the funder: its approval and wire timing decide your closing day.
• The loan changes hands at the table. Payoffs, extensions and draw requests go to whoever holds or services it afterward.
• Ask plainly: whose money funds this loan at closing, and who will hold it the day after? A direct lender gives its own name both times.

Table funding, wet funding and a same day double close

In a double close you buy from the seller in the A to B leg, usually with a short transactional loan, and sell to your end buyer in the B to C leg, whose money repays the transactional lender. Everything depends on the end buyer’s funds being with the closing agent on the day.

Whether the end buyer’s loan is table funded changes who sends that money, not when. The wire comes from the funder, whose name may not appear on the end buyer’s note. What decides the day is wet or dry funding.

In a wet funding state such as Florida, both legs can sign, fund and pay out in one day if the end buyer’s money is with the closing agent for the signing. In a dry funding state, same day means the day the end buyer’s lender funds and the deeds record. Settle these before you set the date.

• Is the end buyer’s loan funded by the lender named on the note, or by a funder through an assignment?
• Who sends the wire, and by what time on the closing day?
• Does the closing agent have the funder’s closing instructions and wire contact, not only the originator’s?
• If the end buyer’s money is a day late, how long can the transactional funds wait, and on what terms?

What to do next

Use the words precisely. Ask whose money funds the loan when you mean table funding, and whether the money is at the signing when you mean wet funding; together, the answers tell you whom to call on the day and when to expect the wire.

Entrusted Capital is a direct lender that funds transactional loans for double closes with its own capital, lending in Florida first, so the name on its loan and the source of the money are the same.

• Before you sign a purchase contract, ask the closing agent whether loans in that county usually fund at the signing or after a review.
• When your end buyer is financing, get the lender’s name and, if different, the funder’s name in writing.
• In California, plan around dry funding, and treat closing in a broker’s name as a licensing question for counsel.