Portfolio lenders are usually savings and loan institutions, and sometimes banks. They are called "portfolio" lenders because they tend to originate loans for their own portfolio (usually adjustable rate loans), not for resale in the secondary market. The distinction gets blurred because most portfolio lenders also engage in mortgage banking.

They will often pay more compensation to their loan officers for originating a portfolio product than for originating a fixed rate loan. You may also find that they are not as competitive as mortgage bankers and brokers in the fixed rate loan market, though this happens less frequently.

It is often easier to qualify for a portfolio loan, so they are often a lender of "second resort" for those who cannot qualify for a fixed rate loan. If a loan officer is steering you towards "sub-prime" loans, it might be wise to check out a portfolio lender first.

Portfolio lenders also can serve as "niche" lenders because certain things are more important to them than meeting the more standardized underwriting guidelines of a mortgage banker. An example would be a savings & loan which is more concerned with an individual's savings history than being able to fully document income.

If you apply for a loan with a portfolio lender and you are declined, that's it. You're done. If you still think you should be able to qualify for a loan, you have to start from scratch somewhere else.