A mortgage loan that is held as an investment by a bank , rather than being sold on the secondary market. It is usually due to the
fact that the loan does not comply with the underwriting guidelines set by the secondary market investors.
Most portfolio lenders follow Fannie Mae and Freddie Mac guidelines but can also give exceptions to your loan if they choose to do so.
Very few lenders are portfolio lenders. Very few people qualify for portfolio loans. Talk to a mortgage specialist to see if you qualify.
It gets confusing because portfolio lenders are also involved in typical mortgage banking. Portfolio lenders, are commonly known as Savings & Loan institutions. They are called portfolio lenders, because they originate loans for their own portfolio, but don't sell them to the secondary market.
Portfolio lenders while rare can also help with borrowers who do not qualify for loans with typical lenders because they make their own guidelines.
If you have a loan which is difficult to fund because your scenario is outside of the standard underwriting guidelines, we can often look at portfolio lenders with you and negotiate for exceptions to the underwriting rules on your behalf.
Savings and Loan institutions and credit unions are common places you might find portfolio lenders. Portfolio lenders will often pay more compensation to its loan officers for originating a portfolio product. However, portfolio lenders are not usually as competetive as mortgage bankers and brokers in the fixed rate loan market. Ask your mortgage professional for more information about portfolio lenders.
Because the default risks associated with making Portfolio Loans, portfolio lenders always charge a higher interest rate to justify the higher risks. In addition to the intrinsic risks, portfolio loans, by definition, are mortgages that lenders will hold in their portfolio for the entire loan term, and cannot resell the loan to recoup their investment capitals, portfolio loan borrowers should expect to be charged higher fees.
The are also some lenders that are not considered tradional portfolio lenders, but do have some programs that are portfolio programs only. These lenders are lending money from their own portfolios and hold onto the mortgage. A couple examples would be Washington Mutual and Bank United.
World Savings is an example of a portfolio lender. They do not sell their loans to other investors or lenders.
The underwriting guidelines for a porfolio product can be far more flexible than for a loan which is being sold to a secondary investor. This flexibility can often mean that the underwriter of the portfolio program can use a much more common sense approach when evaluating things such as past credit problems, prior bankruptcies, lack of cash reserves, etc. In some portfolio programs there is no minimum credit score requirement although the borrowers use of other credit and past credit history is a determining factor in any loan program.
There are lenders available that will keep a portion of their loans as portfolio loans and sell the rest to recoup money and continue to lend. The percentage of the loans they keep depends on the investor involved and how much funding they have.
Thee really is no benifit to the comsumer to stay with a portfolio lender other then never having to change where you send your payment. In todays modern world you can pay your bill online even if the mortgage is sold to a loan servicer. So do not be afraid of you mortgage being sold and do not let a local bank use this as a scare tactic to keep you away from mortgage brokers.