No, the point is that from the seller's point of view, the return on a sold loan/pool is higher than if you kept the loans, because the buyers pay a premium for

No, the point is that from the seller's point of view, the return on a sold loan/pool is higher than if you kept the loans, because the buyers pay a premium for the privilege of buying, and that premium goes straight into the seller's pocket. Then they will use that pocket cash to go buy some (% of) other loans from originators in different industries / different geographic locations / other different characteristics that they can't originate enough of themselves to have a sufficiently diversified portfolio to satisfy investors and board members who are risk averse. It is not about passing off the risk entirely (credit unions have to retain at least 10% ownership for themselves, for example), since you are still going to buy % participation in other loans that have risk, but about trading out a large investment at a lower return for a smaller investment at a higher return.