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Thread: Wells Fargo want to sell $10 Bn Student loan book...A potential loop hole...?

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    Scotland Avalon Member scotslad's Avatar
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    Default Wells Fargo want to sell $10 Bn Student loan book...A potential loop hole...?

    OK, so the Fed back in 2018 issued a consent order on the bank because of its criminal activity. Whilst the bank will be faced with the decision of having to

    a) issue higher margin loans
    or
    b) somehow unlock balance sheet space to issue debt that results in a higher yield.

    It still needs to ensure its liquidity is generous in case of another market crisis.

    Interestingly, if it finds a buyer for its $10 billion student-loan portfolio, and the "debts" sold....would this raise a potential loop hole or LAWFUL way for all the thousands of students of avoiding repaying the original debt/loan?

    I am curious (and don't know the answer) but If the debt is sold, and the new acquirer pursues the debtors, will the individual debtors (the students) be able to argue:

    a) their debt is not with the new "owner" as their contract/agreement is not with them?
    b) there would be no blue ink signature on a contract with the new owner from student?
    c) If the debt was sold and there was no "accounting loss" in acquiring the debt, will they be able to demonstrate this in the pursuance of the debt...?

    e.g. if they buy a $100K loan for say $5K, and pursue the oustanding balance/profit technically owed by the student, is there a legal/lawful argument to counter the debt?

    Am curious. Any thoughts...?
    Last edited by scotslad; 27th October 2020 at 21:17.

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    Avalon Member Satori's Avatar
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    Default Re: Wells Fargo want to sell $10 Bn Student loan book...A potential loop hole...?

    H(
    Quote Posted by scotslad (here)
    OK, so the Fed back in 2018 issued a consent order on the bank because of its criminal activity. Whilst the bank will be faced with the decision of having to

    a) issue higher margin loans
    or
    b) somehow unlock balance sheet space to issue debt that results in a higher yield.

    It still needs to ensure its liquidity is generous in case of another market crisis.

    Interestingly, if it finds a buyer for its $10 billion student-loan portfolio, and the "debts" sold....would this raise a potential loop hole or LAWFUL way for all the thousands of students of avoiding repaying the original debt/loan?

    If the debt is sold, and the new acquirer pursues the debtors, will the individual debtors (the students) be able to argue:

    a) their debt is not with the new "owner" as their contract/agreement is not with them?
    b) there would be no blue ink signature on a contract with the new owner from student?
    c) If the debt was sold and there was no "accounting loss" in acquiring the debt, will they be able to demonstrate this in the pursuance of the debt...?

    e.g. if they buy a $100K loan for say $5K, and pursue the oustanding balance/profit technically owed by the student, is there a legal/lawful argument to counter the debt?

    Am curious. Any thoughts...?
    This will turn on the law governing student loans and whether the loan agreement allows the original lender to assign the loan to a subsequent purchaser who then becomes the original “lender” with all rights of the original lender. This is very, very common, if not occurring without a exception. I’d be extremely surprised if student loans cannot be assigned. In fact they are often bundled, like real estate and other loans, and sold at discounts to investors.

    So, it is my educated guess that any purchaser of student loans will be able to collect the debt and sue on it if there is a breach by the debtor.

    The real issue for any subsequent buyer of a loan, as well as the original lender, is to be able to prove it (or they) are indeed the owner of the loan and have the right to collect and sue on it. The debtor is only liable to the party who actually owns the commercial paper on the debt.

    It has been a problem in the real estate foreclosure area in the USA, that is, suing on a debt but not having the necessary paper work, original documents and so on, to prove you have the right to sue and can discharge the debtor from any further liability on the debt. It will be an issue for any person who buys a debt, regardless of the nature of the debt.
    Last edited by Satori; 27th October 2020 at 21:22.

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