Whole Loan

AAA

DEFINITION of 'Whole Loan'

A single residential or commercial mortgage that a lender has issued to a borrower and that has not been securitized. Whole loan lenders commonly sell their whole loans in the secondary mortgage market to buyers such as Fannie Mae. One reason lenders sell whole loans is to reduce their risk. Instead of holding a mortgage for 15 or 30 years and hoping that the borrower will repay the money, the lender can get the principal back almost immediately.

BREAKING DOWN 'Whole Loan'

The lender no longer earns interest on the whole loans that it sells, but it gains cash to make additional loans. When the lender closes additional mortgages, it earns money from origination fees, points and other closing costs paid by borrowers. This liquidity also makes it easier for borrowers to get mortgages. Fannie Mae will buy whole loans one at a time, but some other secondary market entities will only buy pools of whole loans. Loan pools can reduce risk as long as the pool includes loans with different risk characteristics, such as varying loan terms and credit scores. Fannie Mae reduces its risk by requiring that the whole loans it buys meet specific eligibility and underwriting criteria.

RELATED TERMS
  1. Collateralized Mortgage Obligation ...

    A type of mortgage-backed security in which principal repayments ...
  2. Mortgage

    A debt instrument, secured by the collateral of specified real ...
  3. Whole Pool

    In the mortgage-backed securities market, whole pools refer to ...
  4. Spot Loan

    A spot loan is a type of mortgage loan made for a borrower to ...
  5. Fannie Mae - Federal National Mortgage ...

    A government-sponsored enterprise (GSE) that was created in 1938 ...
  6. Ginnie Mae - Government National ...

    A U.S. government corporation within the U.S. Department of Housing ...
Related Articles
  1. Credit & Loans

    Mortgages: Fixed-Rate Versus Adjustable-Rate

    Both of these have advantages and disadvantages depending on your financial needs and prospects.
  2. Credit & Loans

    Mortgage Points: What's The Point?

    Learn how to pay less for your home in the long run, or save in the short run.
  3. Personal Finance

    Understanding Your Mortgage

    We walk through the steps needed to secure the best loan to finance the purchase of your home.
  4. Insurance

    Behind The Scenes Of Your Mortgage

    Four major players slice and dice your mortgage in the secondary market.
  5. Budgeting

    Mortgages: How Much Can You Afford?

    Answering this means number-crunching as well as factoring in other considerations and expenses.
  6. Credit & Loans

    Understanding The Mortgage Payment Structure

    We explain the calculation and payment process as well as the amortization schedule of home loans.
  7. Options & Futures

    The Reverse Mortgage: A Retirement Tool

    Discover another way to fund your retirement without having to make payments on a loan.
  8. Budgeting

    The 7 Best Ways to Get Out of Debt

    Obtain information on how to put together and execute a plan to get out of debt, including the various steps and methods people use to become debt-free.
  9. Credit & Loans

    5 Signs a Reverse Mortgage Is a Bad Idea

    Here are the key situations when you should probably pass on this type of home loan.
  10. Credit & Loans

    5 Signs a Reverse Mortgage Is a Good Idea

    If these five criteria describe your situation, a reverse mortgage might be a good idea for you.
RELATED FAQS
  1. How does a bank determine what my discretionary income is when making a loan decision?

    Discretionary income is the money left over from your gross income each month after taking out taxes and paying for necessities. ... Read Full Answer >>
  2. What is the difference between "closed end credit" and a "line of credit?"

    Depending on the need, an individual or business may take out a form of credit that is either open- or closed-ended. While ... Read Full Answer >>
  3. In what instances does a business use closed end credit?

    The most common types of closed-end credit used by both businesses and individuals are mortgages and auto loans. Businesses ... Read Full Answer >>
  4. What are the long-term effects of delinquent accounts?

    Delinquency occurs when borrowers fail to make payments on their loans. All loan borrowers should do their best to avoid ... Read Full Answer >>
  5. How was the American Dream impacted by the housing market collapse in 2008?

    The American Dream was seriously damaged by the housing market collapse in 2008. In many ways, the American Dream is a self-fulfilling ... Read Full Answer >>
  6. How much risk is associated with subprime mortgages?

    A large amount of risk is associated with subprime mortgages. Since the mortgages are specifically for people who do not ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Bubble Theory

    A school of thought that believes that the prices of assets can temporarily rise far above their true values and that these ...
  2. Stock Market Crash

    A rapid and often unanticipated drop in stock prices. A stock market crash can be the result of major catastrophic events, ...
  3. Financial Crisis

    A situation in which the value of financial institutions or assets drops rapidly. A financial crisis is often associated ...
  4. Election Period

    The period of time during which an investor who owns an extendable or retractable bond must indicate to the issuer whether ...
  5. Shanghai Stock Exchange

    The largest stock exchange in mainland China, the Shanghai Stock Exchange is a nonprofit organization run by the China Securities ...
  6. Dead Cat Bounce

    A temporary recovery from a prolonged decline or bear market, followed by the continuation of the downtrend. A dead cat bounce ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!