Thursday, March 7, 2013

New Front Against Enforcement of Securitized Student Loans

In plain English if a chartered bank did not take in the loan as a loan receivable and instead converted it into a bond receivable to investors, then the bank took no risk at all, and there was no reason to provide a guarantee of a risk of loss that did not exist. The misrepresentation of the financial community has dumped hundreds of billions of "losses" onto the federal government when those losses were actually covered by various risk avoidance vehicles like insurance and credit default swaps.
So here is how it is working now, from what I can determine at this time: the bank stands in as naked nominee in the loan with no assumption of any risk and therefore nothing to guarantee. The bank is renting out its name to grab onto the federal guarantee because it is not apparent that investors are funding the loan and that insurance and credit de fault swaps are not only protecting against the loss, but providing the same opportunity for Wall Street to create tier 2 yield spread premiums and multiple payments of the entire principal --- payable to Wall Street investment banks who never had a nickle in the game. The proceeds of insurance and credit default swaps are neither reported nor paid to the investors --- just like the mortgage mess.
The predatory loan infrastructure is virtually identical to the one seen in the mortgage market. Teaser rates are provided with no interest or very low interest payments while the student is in school and then, without any governance from regulators, the interest rate starts to rise attaining great heights.

Livinglies Opens Up New Front Against Enforcement of Securitized Student Loans

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