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What Are Portfolio Mortgage Lenders?
Non-QM lenders are portfolio mortgage lenders, which means they fund their mortgage loans and either keep them in their portfolio or sell it on a private secondary market to institutional investors, insurance companies, money managers, or hedge funds.
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This discussion was modified 1 year, 9 months ago by
Eric Jeanette.
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This discussion was modified 1 year, 9 months ago by
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2 Replies
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Does this belong here or in the Non QM forum?
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What Are Portfolio Mortgage Lenders?
Portfolio mortgage lenders offer their services by developing, planning, and implementing their own mortgage loans, which they choose to manage. This practice affords them lots of advantages because they can set up their lending requirements and proceed to offer a variety of types of loans.
Key Characteristics of Portfolio Mortgage Lenders
Loan Retention:
Keeping Loans in Portfolio: Institutions that lend have no option but to keep their loans, which means they have to perform loan management, such as servicing, collection, and all recovering processes.
Flexible Underwriting:
Non-QM Loans: Portfolio lenders may make Non-Qualified Mortgage (Non-QM) loans, which are not under the requirements of Fannie Mae and Freddie Mac. This way, they can lend to those who may not manage to get average loans, such as self-employed people or individuals with uncommon incomes.
Custom Loan Products:
Tailored Solutions: Since portfolio lenders do not have rigid rules, they can offer non-conventional loan products such as interest-only, stated income loans, and even loans for unique properties.
Selling Loans: These lenders can also sell loans on the private secondary mortgage market to institutional investors, insurers, money managers, or hedge funds, which may assist them in liquidity and risk management.
Risk Management:
Selective Lending: Portfolio lenders can start lending with persons based on their own considered risk instead of uniform guidelines, as they can determine the risk they are willing to take. This would also mean that templates and forms would need less work on the client’s end.
Interest Rates and Terms:
Potentially Higher Rates: Interest rates and fees may be higher than other loans because portfolio lenders will likely bear higher risks.
Providing anyone with flexible options to lend to individuals who generally do not meet the predetermined criteria is the biggest contribution of firms as portfolio mortgage lenders. The ability to retain loans and create customized products enables them to meet diversified financial needs, making them a valuable resource for people seeking mortgage finance.