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Beyond it being easier to sell in bulk to another firm, I think a business would never do this voluntarily because it distills out people who were most likely t
by mattnewton 4y ago
Beyond it being easier to sell in bulk to another firm, I think a business would never do this voluntarily because it distills out people who were most likely to pay and makes the remaining debt slightly more toxic on average.
They would have to have a discount much lower than 30% to homeowner, and a way steeper discount to the firm buying the remaining bundle of people who didn’t take the offer.
- everforward 4y agoI think it's worse than slightly more toxic, it would be virtually unsellable. People with decent credit will simply get a new loan for 70% of their principal; kind of like refinancing. That means rather than having to buy both the good and bad loans in bulk, firms can cherry pick the loans they want to buy. Any loans left after that cherry picking will have already been turned down by the potential buying firms. They're effectively un-sellable, because everyone has already turned down buying them by refusing to issue a new loan in it's place.
- Spivak 4y agoI fail to see how this is a bad thing. Oh no my extremely risky loans are being priced correctly as worthless and I can’t sell them!
- mattnewton 4y agoI don’t think they are saying it’s a bad thing for the market, they are saying it’s a very bad thing for the seller, so why would they shoot themselves in the foot that way?