Agreed. You can argue packaging these loans has brought in more investors and competition and have allowed some rates to be lower which can help the consumer.

In fact ... student loans are often packaged and sold to second or third party investors with the student having no say. Similar to home loans. It is this sale ability that makes the loans great investments for the right firms.

They also package the loans together and sell as a packaged unit.

Wanderer wrote: ......the odds of any lender making the loan without the ability to sell the loan are virtually zero in today's market place.

That makes sense, I never looked at it that way before. Make it sellable to someone else, just in case. Or make it sellable because you know you will?

Weasels.

FrankN wrote: They buy the loan as the original agreement, but it creates complexities on who to pay, when to pay, and stuff like that. Also some lenders are more friendly with a missed payments while others are more cut throat.

Also if the original terms include allowances for the lenders to modify the terms, a new lender can take advantage of that to get the T&Cs changed to something they prefer. Depending on the terms of the agreement they might not even have to give an advance notice period to the person paying the loan.

They buy the loan as the original agreement, but it creates complexities on who to pay, when to pay, and stuff like that. Also some lenders are more friendly with a missed payments while others are more cut throat.

All that being what it is, don't the companies that buy these loans have to honor the original terms? I was just thinking that in theory, it shouldn't be that big of a deal if they can't change the terms the borrower originally agreed to.

Its a very complex thing as companies set up their business in different ways (some want to hold the loans for the interest, while others just want to originate the loan, take the fees and sell it). Having both business models in theory helps grow the overall market and allows the consumer to have more options and availability to get loans. There are obvious drawbacks as you describe and companies were definitely committing fraud during the financial crisis.

FrankN wrote: It definitely is not to help the consumer at all. Its more about the entire investing world in regard to mortgages and mortgage investments. Some banks just want to originate and then sell the investment. Other investors want to purchase and good returning asset. Unfortunately there is no way to stop this and no way for you to fight against this. This is a form of capitalism.

This made me think of one of the big topics that came up during the confirmation hearing of Mnuchin the other day. When his bank bought a bunch of mortgages and people were foreclosed on, I would definitely say it wasn't beneficial to the consumer. I believe they were fined and had to pay money back to the borrowers, but that doesn't help if you've already been kicked out of your house.

If the loan is only on there once, just under a different lender's name, that won't affect your report.

Is the loan showing on your report twice, once for Direct Loans, and once for mohera, both with the full amount outstanding? That definitely would affect your credit score as it is an extra loan on your credit report, and it makes it look as though you owe twice as much as you do. Depending on how Direct Loans handle payments, if it looks as though you are not paying the Direct Loans balance off because your payments are only being applied to the mohera balance, that could do significant damage. I'd call Direct Loans and find out why it is being reported like this, and ask them to resolve it. If they don't, then go to Experian with the issue.

It definitely is not to help the consumer at all. Its more about the entire investing world in regard to mortgages and mortgage investments. Some banks just want to originate and then sell the investment. Other investors want to purchase and good returning asset. Unfortunately there is no way to stop this and no way for you to fight against this. This is a form of capitalism.

Same is true with Mortgages and I agree with you! However, you are suppose to read the Terns & Conditions before you take any loans and if not satisfied pass on the loan. Note, the odds of any lender making the loan without the ability to sell the loan are virtually zero in today's market place.

FrankN wrote: Loans are sold to other lenders all of the time. Unfortunately most of this is explained in the fine print but is difficult to interpret. I would say most of the time the bank you get the loan with, most of them will ultimately sell it to another lender.

While I understand that this happens, I don't understand how this can happen without the consumer having a say in it. This typically doesn't benefit the consumer at all, so there really should be some safeguard in place to where lender would have to ask us if we want this done or not. Not just tell us that it happened after the fact.

This practice just isn't right in my opinion.

If you get a mortgage through a large bank, I would bet your loan will be packaged and sold to someone else. You may not see it b/c you will have a servicer who handles your payments, but its extremely unlikely for the bank to keep that loan on its books.

My experience with the sale of home loans is they open a new loan and close the old one on the credit bureau but it did not affect my CB scores. Now in the case of credit cards, often the lender replaces the existing credit reporting information and there is no affect to the score. However, I have had lenders open a new account and close the old account with separate bureau entries and I don't remember taking a hit in the CBs but I must have?!