Cherry-Picking

Cherry-picking is the practice of reviewing a loan pool and bidding on only the individual assets that meet a buyer's investment criteria, rather than purchasing the entire portfolio. After receiving a data tape, the buyer filters loans by geography, lien position, UPB range, delinquency status, or property type and submits offers on just the loans that fit their buy box. The remaining loans stay with the seller.

Not all sellers allow cherry-picking. Institutional sellers — particularly banks clearing large portfolios — often require buyers to bid on the full pool to prevent the best assets from being stripped out while the hardest-to-resolve loans remain unsold. Sellers who do permit cherry-picking typically price individual loans higher to compensate for the lost efficiency of a bulk sale. For smaller investors who lack the capital or operational infrastructure to absorb an entire pool, cherry-picking provides a path to acquiring institutional-quality assets on a loan-by-loan basis, though at retail rather than wholesale pricing.