Whole Loan
Also known as: whole loans, whole loan trading, whole loan sale
A whole loan is a single mortgage loan — one borrower, one property, one debt — traded as an individual asset on the secondary market. When you buy a whole loan, you own the promissory note and receive an assignment of the mortgage (or deed of trust). You become the lender. Every resolution decision — modify, foreclose, accept a payoff — is yours.
Whole Loans vs. Mortgage-Backed Securities
The secondary mortgage market has two distinct segments:
| Whole Loans | Mortgage-Backed Securities (MBS) | |
|---|---|---|
| What you own | The individual loan — note, mortgage, and security interest | A bond representing a share of pooled cash flows from thousands of loans |
| Control | Full — you decide the workout strategy for your borrower | None — a trustee and servicer make all decisions |
| Trading venue | Private transactions, platforms like FIXnotes, broker networks | Bond markets (Wall Street) |
| Typical buyers | Private investors, hedge funds, community banks | Institutional investors, pension funds, mutual funds |
| Due diligence | Loan-level — you review each borrower, property, and file | Pool-level — you analyze tranche structure and credit ratings |
| Pricing | Individual asset pricing based on borrower situation, equity, and state | Bond pricing based on interest rates, prepayment speeds, and credit risk |
Whole loan investing is hands-on. You evaluate individual assets, make workout decisions, and manage outcomes directly. MBS investing is passive — you buy a financial product and collect cash flows determined by someone else's decisions.
How Whole Loans Trade
Whole loans are sold individually or in pools. Sellers provide a data tape — a spreadsheet with loan-level details — and buyers bid on the assets they want. Pool sizes range from a single loan to hundreds, depending on the seller:
- Banks and credit unions sell pools of dozens to thousands of loans
- Aggregators break large pools apart and resell in smaller groups
- Marketplaces and brokers often sell individual loans or small pools
Unlike MBS, whole loan transactions are private. There is no exchange, no ticker symbol, and no standardized pricing. Every deal is negotiated between buyer and seller, which is why relationships, deal flow, and due diligence skills matter in this market.
Why Whole Loans
Whole loan investors accept the operational burden of managing individual assets because the trade-off is control. When a borrower on your loan stops paying, you decide what happens next. You can restructure the debt, negotiate a settlement, or take the property. That control — combined with the steep discounts available on non-performing loans — is what creates the return profile that attracts investors to this asset class.
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