General Mortgage Knowledge · 20% of the SAFE exameasy
Correct answer: Whole loan sale = an individual loan is sold to a single buyer; securitization = many loans are pooled together into mortgage-backed securities (MBS)
In a whole loan sale, the lender sells a single loan to another entity (bank, investor, or GSE). In securitization, many loans are pooled together and converted into mortgage-backed securities (MBS) that are sold to investors. For borrowers, the key implication is that servicing may transfer in either case. Securitization spreads risk across many investors and many loans; whole loan sale concentrates risk in a single buyer. Both mechanisms provide liquidity to the primary market, allowing lenders to make new loans.
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