A mortgage pool is an investment vehicle for private real estate loans that works similarly to the way a mutual fund works for public stocks: The pool invests in a variety of lending opportunities, and investors in the pool participate fractionally in all of them.
By allowing investors to spread their investment over a large number of loans, mortgage pools provide trust deed investors with greater diversification. Because the impact of any one loan on the entire portfolio can be kept to a minimum, this diversification helps reduce investor risk. Depending upon the terms of the specific pool, this type of investing may also offer other advantages versus investing in a single loan, including the ability to participate with a smaller initial investment, greater liquidity, and the opportunity to reinvest monthly yield payments into the pool.