A “conventional” loan is somewhat of a misnomer. A truly “conventional” loan would be a traditional mortgage loan issued to you by your local bank that would be held in the bank’s loan portfolio and serviced in-house. This kind of loan generally requires a 25% down payment and usually carries a slightly higher interest rate than what one might expect to see in the marketplace at large because the bank is taking on the risk of default onto its own loan portfolio. This loan type is called a “portfolio” loan and in virtually every other country outside of the United States a portfolio loan is a “conventional” way of purchasing a house.
A typical consumer of a portfolio loan is one who has taken out a construction loan with a community or local bank and then has taken out a permanent loan with that same bank at the end of construction. Another typical consumer of a portfolio loan would be a borrower with a “jumbo” (or large) loan where the bank takes the loan onto its portfolio. In addition, persons who purchase and hold residential land will typically take out a portfolio loan if they have 40-60% to put down for the down payment. If emerging from Chapter 7 bankruptcy or foreclosure you can forget about acquiring a portfolio loan for at least 7 years.
Technically, however, any loan held by a bank on its loan portfolio is considered a “portfolio” loan. In its most basic form, whether a loan is a “portfolio” loan or not is simply a matter of perspective.
Our Product
LeaderOne Financial Corp. has a loan portfolio that is approximately $100 million in size. The typical profile of our loan portfolio is a loan that falls slightly outside conforming loan requirements in terms of LTV or borrower credit profile.