What is the difference between conforming, non-conforming and portfolio loans?
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What is the difference between conforming, non-conforming and portfolio loans? A loan
that conforms to the guidelines established by Fannie Mae or Freddie Mac is considered a conforming loan. These guidelines establish the maximum loan amount, down payment, borrower credit & income requirements, and suitable properties. Lenders that make loans established to these guidelines may sell those loans to Fannie Mae or Freddie Mac. These lenders may retain the servicing on these loans so that a borrower will continue to make payments to the original lender. Conforming loans make up the majority of loans in the U.S. A loan that is larger than the conforming loan limit is called a Jumbo loan. Loans that do not meet the credit quality of conforming loans ('A' paper) are called 'B','C' and 'D' paper loans. Second mortgage loans - credit lines, home equity loans, home improvement loans are also non-conforming loans. Portfolio Loans-loans may be sold on the secondary market to Fannie Mae, Freddie Mac or a select number of conduits or they be kept in the banks portfolio. Portfolio loans may have more flexible qualifying criteria, while saleable loans have to meet an investors criteria.
The loan professional that has made this information available to you specializes in assisting those individuals with obtaining a home loan whether for purchase or refinance. Your loan professional in most cases can advice you on the best approach and help you with your specific loan requirements.
