Final answer:
In the practice of warehouse lending, collateral is used to protect the lender against fraudulent activity.
Step-by-step explanation:
Warehouse lending is a practice in the financial capital market where banks provide short-term loans to mortgage lenders, secured by the mortgage loans that the lenders make to borrowers. In this practice, collateral is used to protect the lender against fraudulent activity. Collateral refers to property or equipment that the bank can seize and sell if the borrower defaults on the loan. Therefore, option A) Collateral is the correct answer.