A note seller has two structural choices: sell the whole note and exit, or sell a partial — a defined slice of future payments — and retain the tail. Each path preserves a different kind of value. The right answer depends on the seller’s liquidity need, tax position, and view on future cashflow.

What is the structural difference?

A whole-note sale assigns the entire note and mortgage to the buyer. The seller is paid out and the buyer becomes noteholder of record on the recorded chain. A partial sale assigns a defined slice — say, the next sixty months of payments — and retains the tail. The seller continues as beneficial owner of the post-slice cashflow; the buyer holds a documented interest in the specified months.

How does pricing differ between the two structures?

Whole notes price against a single buyer yield against the full payment stream. Partial sales price against a tighter yield on the front-end slice — the buyer takes the most predictable cashflow first, with the seller retaining the tail risk. The blended seller return on a partial can exceed the whole-note price plus reinvestment, because the seller keeps the tail at face cashflow rather than discounted-to-yield cashflow.

What documentation does each structure require?

Whole sale: assignment of mortgage (recorded), allonge to the note (delivered), transfer of servicing notice under §1024.33 (if applicable), and original-instrument delivery. Partial sale: all of the above plus a partial-assignment agreement specifying the slice, a custody arrangement for the original note, a servicing agreement that pays the partial buyer before the seller, and an indemnity for the tail-period risk allocation. Partials carry more paper; the price uplift compensates for it.

Which path fits a seller raising liquidity?

A whole sale produces a single cash event and exits the position. A partial produces a smaller cash event and preserves the tail. Sellers liquidating fully (estate planning, fund wind-down, full exit) sell whole. Sellers raising bridge capital against the position (deploying into a new origination, covering a quarterly liquidity need) sell partial. The structure follows the seller’s goal.

How does default risk allocate in each?

In a whole sale, the buyer absorbs all forward credit risk; the seller exits clean (subject to representation-and-warranty carveouts in the purchase agreement). In a partial, the seller and buyer share risk on the slice — most partials cure the buyer’s position through substitution (the seller substitutes a performing note for the defaulted one) or buyback (the seller repurchases the slice at par). The partial structure preserves the relationship at the cost of optionality.

What does the buyer’s underwriter look at differently?

A whole-note underwriter prices the full remaining payment stream and balloon. A partial-sale underwriter prices the slice only — but underwrites the seller’s creditworthiness because the seller stands behind the substitution-or-buyback covenant. A seller without a track record or balance sheet rarely closes a partial at the same yield as an established seller. Whole sales democratize sellers; partials reward them.

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