What is an unsalable loan?

Generally, in home lending one would say a loan is unsalable if it does not meet all the criteria and regulations expected of any servicing bank, fannie mae, Freddie mac, or other investors who might purchase the loan. Thus, most originating direct lenders who sell the bulk of their loans will have a good compliance team to check the loan from the beginning as will the funding team check all the required paperwork carefully before funding. If it is unsalable, then the loan originator will be stuck with keeping the loan and servicing it...at least until it can be fixed sufficiently to be able to sell it.

All loans are blocked and sold off to investors.. That's the task of Fannie Mae, Freddie Mac and Ginnie Mae. They are the clearing houses which compile the loans in blocks and facilitate the securities offering to the general public. But in order for a loan to be sold off, it must meet minimum "Conforming" guidelines. As with any process where there are humans involved, mistakes happen.. Sometimes an underwriter misses something and a loan that was thought to meet the minimum standards, ends up not.. this loan becomes unsalable.. The lender who issued it must either carry it themselves or sell it off at a discount on the secondary market. An example of this is in regards to condominium projects. For condo financing, the project must meet a "conforming" set of guidelines.. Owner occupancy rate must be 50% or greater, no single investor can own more than 10% of the units, the development must not be involved in any litigation, etc, etc, etc.. If the guidelines are not met, then you cannot get "Conforming" financing and this property becomes "unsalable".. I'm a preferred Lender with Arizona and California being my primary markets. If you or someone you know is looking for financing options, feel free to contact me or pass along my information. 480-287-5714 WilliamAcres.com NMLS# 226347 / RPM Mortgage NMLS 1541014 / AZMB0121893

Lenders do loans, but like the ability to potentially sell it somewhere down the line after closing. Could be immediately, could be years. Lenders sell for many reasons. To make selling easy, lenders underwriting to common guidelines issued by Fannie Mae, Freddie Mac, etc. This is also known as a conforming loan, because it conforms to the guidelines. If the lender doesn't underwriting to the guidelines, either on purpose, but usually by mistake, they have a loan 'unsaleable' to Fannie Mae, Freddie Mac, etc. This is no problem on the homebuyers end, but is a mess for the lender behind the scenes.