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What is a Portfolio Loan & How Does it Work?

A portfolio lender, like WaFd Bank, keeps all the loans they make on their own books. Portfolio lenders don't sell your mortgage to another bank, credit union or other financial institution. Most homebuyers may not be aware, but the bank, credit union or lender they originally choose for their mortgage usually turns around and sells that loan to another company on the secondary market.

Loan officer explains loan details to couple in office.

The secondary market refers to the marketplace where home loans are bought and sold between lenders — banks, credit unions and other Wall Street investors. Typically, there's an intermediary between lenders and investors, usually Fannie Mae or Freddie Mac. Read our previous post to learn about the secondary mortgage market.

Why should you care that your loan might get sold? As a prospective homebuyer applying for a mortgage, you'll need to hand over all your sensitive personal data and financial information in order to qualify for a home loan. You may be approved and get the loan, but then six to eight weeks later you're likely to receive a notice letting you know your loan has been sold. The financial institution that purchased your loan will likely be a lender you don't know and isn't in your community, and probably has an 800 number you'll need to call with questions. Plus, you may need to reestablish your automatic mortgage payments every time your loan is sold and you'll have additional mortgage-related paperwork to keep of for tax season.

Why do mortgage lenders sell loans?

As with many things, it comes down to money. When a lender sells your mortgage, the lender can use the money that was tied up in your loan to provide loans to other people. Since borrowers often pay origination fees to lenders, it stands to reason that the more loans a lender makes, the more money in fees they're collecting.

As a portfolio lender, we choose to run our business a little differently. Unlike most lenders, we believe in the value of long-term relationships and common-sense banking.

Advantages of a portfolio loan with WaFd Bank

For more than a century, WaFd Bank has remained committed to keeping every home loan we make on our books. What's that mean for you?

  • You'll know exactly where to go to talk to an experienced banker and get answers about one of the biggest investments you'll ever make — your home. New homeowners Michael and Joni Unruh from Bend, Oregon said this made a big difference in choosing a bank, “When I found out that WaFd Bank doesn't sell their loans that was really important to us as a family. It says a lot that they would invest in their customers in such a personal way — they care about the people they serve. We're very thankful to know we will be dealing with the same local bank years down the road.”
  • Working with a portfolio lender can be especially advantageous during tough times. For example, during the 2008 recession, we worked with our clients who experienced financial strain to help them keep their homes. In many cases, we were able to modify their loan payments for an extended period of time so they were able to pay their bills. In doing so, we kept 3,000 families in their homes. As a neighborhood bank, we're proud to be able to work with those in our communities to create a repayment schedule that works for them during challenging times.
  • Another benefit of choosing to work with a portfolio lender for your home loan: you'll receive common-sense decisions from your local lending team. This can be especially helpful if your employment situation is out-of-the-ordinary, you're building a custom home or if you're undertaking a significant remodel. When most lenders decide whether or not to approve your home loan application, they're often evaluating the ease of their own ability to resell your loan on the secondary market. If your plans for your custom home include features that aren't typical or standard — like an unusual standard bathroom-to-bedroom ratio or a smaller kitchen — then you may need to change your blueprints in order for your loan to be approved. At WaFd Bank, we don't sell our loans, so we can make decisions about which mortgages to approve based on what actually makes sense — not based on the whims of the secondary market.

Is a portfolio loan with WaFd Bank right for you?

At WaFd Bank, we believe a loan is a commitment a local bank should make with their clients. Since we keep your loan in our portfolio, you know we're in this together. While the steps of buying a home can seem complicated, your neighborhood WaFd Bank team is here to make it easy. We've got the expertise and tools to make sure you stay informed along the way, like our mortgage calculator. Use the calculator to calculate your home loan today.

Contact your local branch to find out how WaFd Bank can help you get your dream home, or learn more about WaFd Bank home loans.

Ready to apply for a mortgage or refinance? Connect with your local WaFd loan officer to get started on your online mortgage application. Subject to credit approval.