High performing institutions understand the importance of evaluating all asset classes when constructing their balance sheets, including whole loans. No different from a securities investment or loan origination, incorporating the secondary whole loan market into balance sheet strategy can often improve institutional performance. In this article we’ll dive into the relative value in the whole loan and participation space as well as drivers of deal value and marketability.
The most direct driver of a loan pool’s price is the characteristics of the collateral itself. These include:
- Coupon (WAC)
- Credit quality
- Weighted average maturity (WAM)
- Servicing type