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>If some guy walks into a bank and claim they're you and they believe it, the banks aren't gaining anything. They would have just sold a loan. >If anything, t

by bsanr2 6y ago

>If some guy walks into a bank and claim they're you and they believe it, the banks aren't gaining anything. They would have just sold a loan. >If anything, they lost money. Can't they sell the defaulted loan to collections? >Lax security practices are negligence at best. Systemic, known, and long-standing negligence speaks to intention.

lotsofpulp 6y ago
> Can't they sell the defaulted loan to collections? Why would anyone pay face value for a defaulted loan?
- deleted 6y ago
  [deleted]
gruez 6y ago
>They would have just sold a loan. Yeah, that's what their books say, but that doesn't necessarily match reality. In reality they gave $1000 in cash to someone, and their expected return on that is a fraction of that. Same logic if you bought paid $800 for bonds with face value of $1000, but unknown to you, the bonds are actually junk bonds with a expected value (factoring in repayment and default) of $500. In that case your paper gains are $200, but in reality you actually lost $300. >Can't they sell the defaulted loan to collections? They gave the bad guy a loan for $1000. They're out $1000. They sell the loan to collections for $300, they're still out $700. >Systemic, known, and long-standing negligence speaks to intention. Security exists on a spectrum, and there are trade-offs to be made. Clearly the banks don't have an interest in selling fraudulent loans, and putting up too much barriers when it comes to authentication also has costs.
- bsanr2 6y ago
  Does... interest stop being a factor? They gave an x-year loan for $1000 at x% APR (was it subprime?). Also, penalties. Collections can go after you for the full amount. They buy it from the bank for the original $1000+. Or, the loan hasn't defaulted yet. The bank suspects it will. They load it into a bundle, get it highly-rated, sell the bundle. They make a profit. A whole bunch of other people get hosed. >Clearly the banks don't have an interest in selling fraudulent loans This is the wrong decade to be making that statement.

by bsanr2 6y ago

lotsofpulp 6y ago

> Can't they sell the defaulted loan to collections? Why would anyone pay face value for a defaulted loan?

deleted 6y ago
[deleted]

gruez 6y ago

>They would have just sold a loan. Yeah, that's what their books say, but that doesn't necessarily match reality. In reality they gave $1000 in cash to someone, and their expected return on that is a fraction of that. Same logic if you bought paid $800 for bonds with face value of $1000, but unknown to you, the bonds are actually junk bonds with a expected value (factoring in repayment and default) of $500. In that case your paper gains are $200, but in reality you actually lost $300. >Can't they sell the defaulted loan to collections? They gave the bad guy a loan for $1000. They're out $1000. They sell the loan to collections for $300, they're still out $700. >Systemic, known, and long-standing negligence speaks to intention. Security exists on a spectrum, and there are trade-offs to be made. Clearly the banks don't have an interest in selling fraudulent loans, and putting up too much barriers when it comes to authentication also has costs.

bsanr2 6y ago
Does... interest stop being a factor? They gave an x-year loan for $1000 at x% APR (was it subprime?). Also, penalties. Collections can go after you for the full amount. They buy it from the bank for the original $1000+. Or, the loan hasn't defaulted yet. The bank suspects it will. They load it into a bundle, get it highly-rated, sell the bundle. They make a profit. A whole bunch of other people get hosed. >Clearly the banks don't have an interest in selling fraudulent loans This is the wrong decade to be making that statement.