Here are some links that prove banks sell your debt:
We found these in a web search, as outlined below
We searched the web for the following two phrases:
“Are my credit card debt securitized”, and
“What is securitization”
The following link is from Wikipedia, the free encyclopedia: Securitization, wherein the Wikipedia definition states clearly:
“Securitization is the financial practice of pooling various types of contractual debt such as residential mortgages, commercial mortgages, auto loans or credit card debt obligations (or other non-debt assets which generate receivables) and selling their related cash flows to third party investors as securities”
In the following link: Credit card asset-backed securities and their impact on U.S. household financial stability, it states clearly in the third paragraph:
“Securitization, a process of pooling illiquid financial assets (such as loans, bonds, and mortgage) and selling the assets as liquid products to investors, emerged in 1970s and grew dramatically in early 2000s.”
Furthermore, under the heading “II. Background & Past Academic Papers“, it clearly states:
“The process of securitization is as following: first, the originators pool a group of similar illiquid and non-tradable financial assets (such as mortgage or car loan payments). Second, they transfer those assets to a Special Purpose Vehicle (SPV), whose sole purpose is to issue the securities. Then, they repackage the cash flows through financial contracts with different parties involved.”
According to the dictionary, “Transfer” is another term for, “Sell”.
More links proving the banks sell your debt:
This link from the Financial Post, states credit card debt is securitized: DBRS’s take on credit card debt and securitizations.
This link: Securitization, states in the second paragraph:
“Securitization is the practice of combining various debt obligations (like residential mortgages, commercial mortgages, auto loans or credit card obligations) into one consolidated debt instrument, or security, such as a bond. Once the debt obligations have been pooled, a coupon is set and paid to the bond purchaser.”
By using the term “purchaser” it proves they are referring to the bank selling your debt.
Why banks sell your loan
In this link: Why banks sell loans they make, under the heading, “Why loans are sold”, it is stated:
“Many consumers don’t realize there’s a thriving market for loans, referred to as the secondary market. When you borrow from a bank or credit union, you may not notice that the fine print on the lending agreement says the loan may be sold.
“Most lenders sell loans due to liquidity reasons, meaning they don’t want the loans in their balance sheet,” says Cristina Zorrilla, assistant vice president of mortgage pricing and investor relations with Navy Federal Credit Union. “They sell loans so they can lend to more borrowers.”
Some lenders sell loans to other financial institutions but keep the servicing rights.
This means the customer still deals with the same lender and sends the payments to the same place. It hardly affects consumers, since the point of contact doesn’t change. However, many lenders don’t have the capacity to continue servicing all the loans they make, so they sell both the debt and the servicing rights. When that happens, customers have to send their payments to a new organization — and will deal with that new party if problems arise. Only a few, including Navy Federal Credit Union, never sell servicing rights.”
There are more examples you can find by searching properly.
Some YouTube videos which mention the banks sell your debt:
These videos explain securitization. They can get pretty in-depth, so therefore we have mentioned times within the videos where they mention that the banks sells the debt to a third party.
This next video explains how securitization occurs with your credit card debt. Every one should be aware of this fact. Please watch the entire video, but note these time-indexed highlights:
- 1:03: the narrator states, “credit card debt is bought and sold”,
- 1:30: the narrator states, “credit card debts are bought and sold”,
- 2:30: the narrator states, “they sell the debt to another party” and,
- 3:05: the narrator states, “a third party comes and buys the debt.”
In this next video, at 0:43, there is a diagram. Notice in the diagram, where it illustrates Fannie Mae exchanging money to the bank (buying the debt from the bank):
At 0:29 into this video, it clearly states that the bank sold your debt by securitization:
In this video, 0:50 seconds, the narrator states that the banks want to sell the debt and at 2:25, says they grouped your debt and cut it up and sold it:
At 0:30 seconds of this video, the narrator states that they sell the debt:
In this video, at 0:50 seconds, the narrator states the banks will sell your debt:
These are the tip of the iceberg in terms of what one can find on the Internet proving banks sell debt for others to buy.
“In the finance industry, a debt is an asset which can be bought and sold.”
Doing the research
Completing the research to confirm if the bank really does sell your debt or asset can be tricky.
Keep in mind that selling your debt is one of the banking industry’s best-kept secrets..
The banks will never admit, in promotion videos or information released to the public, that they sell your debt. Legally-speaking, they must mention it in all credit card and loan agreements their clients sign.
All credit card or loan agreements refer to the following:
“Your creditor may, without notice to you, and without your consent, sell, transfer, pledge, assign or assign all or part of this agreement …. to any third party.”
This paraphrase, found within all credit card or loan agreements, proves your creditor was contemplating selling your debt to a third party from the date your contract was signed.
Look through your contracts and look for the heading “assignment” or ” assignee”. This is where you will find the above paraphrase within your contracts. If you can not find it yourself, we will be more than happy to help you.
The documentation we request, proving they are still the rightful owner of the debt, is a very reasonable, simple request:
Your creditor needs to prove they are currently the rightful owner of the debt. This is because banks exchange debts every day, as all client agreements state.
Simply put, your creditor could have sold your debt, as implicated in your client agreement. If they did sell the debt, you can financially benefit when using a private lender.
“The banks are doing everything in their power to keep this a secret.”
How do the banks profit from selling your debt?
To illustrate how creditors profit by selling debt, here is a simple example:
A $20,000.00 loan at 29% (compound interest) over a 5 year term compounded yearly is worth $71,446.10. Verify by using these numbers in a compound interest calculator.
When your creditor accumulates $20,000.00 worth of debt with the above terms and conditions, they can sell the debt for a profit, considering it is worth $71,446.10.
When an asset or debt is created for $20,000.00, but is worth $71,446.10, it is obvious how it can easily be sold for profit.
If your creditor sold the $20,000.00 debt for $30,000.00, they would have made a profit of $10,000.00.
It is a very simple concept to understand!
The banks are doing everything in their power to keep this a secret. What they have no control over is who they sell the debt to. The entities that buy debts from banks will obviously advertise their services and products. The product in this case is the debt from the bank. Due to the fact they want to resell debt for profit, they advertise it.
So, if you search the web for, “do banks sell your debt“, you will find limited information.
The above search will pull up debt help or explain how a bank can sell your debt to a collection agency.
Keep in mind we are not referring to the banks selling the debt if you went delinquent to a collection agency. We refer to the banks selling your debt to a third party within two weeks of you signing the contract, well before you could have gone delinquent.
Therefore, when researching this concept, enter search terms such as, “are my credit card debt securitized” or, “what is securitization“.