how do lenders use a whole loan 
many lenders choose to package and sell their whole loans in the secondary market which allows for active trading and market liquidity various buyers are available for different types of loans in the secondary market the mortgage market has one of the most well established whole loan secondary markets with agencies like fannie mae serving as whole loan buyers 1 whole loans are often packaged and sold in the secondary market through a process called securitization they may also be individually traded through institutional loan trading groups the whole loan secondary market is a type of fourth market that is used by institutional portfolio managers and facilitated by institutional dealers lenders work with institutional dealers to list their loans on the secondary market lenders can sell personal corporate and mortgage loans loan portfolio managers are active buyers within the whole loan secondary market lenders also have the option to package and sell loans in a securitization deal this type of deal is supported by an investment bank that manages the packaging structuring and sales process of a securitization portfolio lenders will typically package loans with similar characteristics in a securitization portfolio with various tranches that are rated for investors residential and commercial mortgage loans have a well established secondary market through agency buyers freddie mac and fannie mae which typically buy securitized loan portfolios from mortgage lenders freddie mac and fannie mae have specific requirements for the types of loans they buy in the secondary market which influences the underwriting of mortgage loans for lenders example of selling a whole loansuppose lender xyz sells a whole loan to freddie mac xyz no longer earns interest on the loan but it gains cash from freddie mac to make additional loans when xyz closes on those additional loans it earns money from origination fees points and other closing costs paid by borrowers xyz also reduces its default risk when selling the whole loan to freddie mac it has essentially sold the loan to a new lender who services the loan and the loan is removed from xyz s balance sheet 