A collection of loans held for servicing or investment by the orginal lender. Typically a bank/broker will lend their own funds, or the funds of their warehouse line, and immediately turn around and sell the loan on the secondary market. With a portfolio loan, the bank is lending their own funds and holding onto the loan. 

Bankapedia's Take

 You may be asking yourself why the.  bank would want to hold onto the loan themselves instead of getting it off their books, freeing up their banking line, and making a tidy little profit. Well typically the reason is that the bank simply is unable to. Usually portfolio loans are oddball loans, that are not sellable on the seconday market. This doesn't necessarily mean that the loan is bad or has a hugh percentage of default, it may be that the a particular loan doesn't fit into any of the secondary markets guidelines. 

Take for example a wealthy couple looking to purchase a 4th or 5th home. They would prefer not to go through the hassle of having to prove their income, so they would like a stated loan. They would also prefer not to put more than 10% down. More often than not most secondary lenders prefer not to lend on anything beyond a 3rd home, if the properties are non rent producing. Let's say, in this instance, the bank financing the 5th home of this wealthy couple has the note on several of their other properties, and they have a perfect track record of payment. This bank also happens to be this couples depository bank and they have over $1,000,000 in savings. The bank feels safe, and rightfully so, that they will pay there mortgage on time. So they decide to lend their own cash on the loan and keep it on there books. 

The downside to portfolio lending however, is that in a declining real estate market, a lender with a lot of portfolio loans on their books, is going to be a lot more exposed to market conditions. Instead of selling the loans off on the secondary market and walking away with no risk of default or a decaying assett, they now have a glut of declining assets. If one of their portfolio loans were to default and they were unable to recoup the money in foreclosure sale, they would simply be out that money. 

For More on Portfolio Lending- Check out our Article What is a Portfolio Loan?