
Do You Know Who Owns Your Debt? - howard941
https://www.gq.com/story/debt-buying-collectors
======
statusquoantefa
I once thought it would be funny to offer a service that bought "bundles" of
securitized mortgages, but would then separate them out and offer to sell
specific mortgages to people's arch enemies who would presumably pay a
premium.

the elevator pitch is "the google of mortgages".

~~~
tzs
I'd find it hilarious if my arch enemy [1] bought my mortgage, especially if
they paid a premium to get it.

When someone buys your mortgage it doesn't change the terms of the mortgage.
For the most part all that changes is who you send your payments to.

Probably the worst that they could do is (1) make you use a payment method
that is inconvenient for you, such as mailing an actual check once a month,
and (2) if you violate any terms of the contract be hard nosed about it.

[1] I'm actually between arch enemies at the moment, so the position is open
if anyone would like to apply.

~~~
ende
> make you use a payment method that is inconvenient for you, such as mailing
> an actual check once a month,

This is really the biggest challenge facing borrowers. The means of payment
should really be locked in. Fortunately the servicer doesn’t always change
too, but that is something that the law should probably protect.

I could imagine the law requiring the consent of the borrower to the transfer
of servicer, or some similar mechanism.

~~~
jonwachob91
>>> This is really the biggest challenge facing borrowers. The means of
payment should really be locked in.

Why? Some debt terms are incredibly long, such as a 20/30 year mortgage. Many
soon to be paid off mortgages were signed before online banking / online
payments was a thing. So you would be forcing people to continue using
outdated and inefficient technology,,, b/c no reason at all.

Can you imagine the payment technology we will have 20 years from now? If I
bought a house with a mortgage today, why should I be forced to continue using
today's technology for another 20 or 30 years when a better technology is out
there?

~~~
aaron_m04
Okay, yes, locking in the payment method at the start is bad, but what if it
can't be changed without the consent of both parties? Presumably if some
awesome new payment system becomes available, both parties would consent to
use that.

~~~
zamfi
A mortgage is usually a contract between two parties, so...both parties can
agree to change anything about the contract at any time anyway.

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devicetray0
> The average price, according to a 2013 Federal Trade Commission (FTC)
> report, is about 4 cents per dollar, which means a $200 credit card balance
> goes for $8 on the secondary market.

Wow, that is cheap. Is there a way to buy your own debt?

~~~
analog31
My dad tried to buy the mortgage on our family home from the local bank. It
was at a time of rapidly rising interest rates, and according to the textbook
calculation, our mortgage was costing the bank to hang onto. He figured out
the fair market value of the mortgage, and offered to split the difference
with the bank. Each side would profit.

The banker's first reaction was: This can't be real. A week later, the banker
called my dad back and said: Sure enough, the numbers say that we should sell
you your mortgage. But we also found out that it's illegal.

I don't know the details of why it might have been illegal, but it was an
amusing episode.

~~~
DennisP
People sell mortgages all the time. Is it just illegal to sell a mortgage to
the borrower?

If so, suppose two borrowers team up and buy each others' mortgages?

~~~
analog31
In response to both the posts here, I don't know. It also could be that the
banker was full of it. On the other hand, I could imagine a sort of moral
hazard situation where someone could take out a loan, let it go into default,
and then offer to buy it back at a massive discount.

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xyst
The entire industry of debt collection is literally scum. Debt can be sold to
these parasites at any point in a transaction with a company.

During my college days, an apartment complex tried to add on various move out
fees when I didn’t renew. Despite being in active dispute with the complex
about the fees, the complex ended up sending the fees to a debt collector.

Fortunately I was able to reduce the amount to an agreeable state and it never
reported to the CRA. Still have clean reports to date.

~~~
stingraycharles
That sounds more like the complex was scum, rather than the debt collector.
What did they do wrong here?

~~~
shkkmo
The industry buys debts with little to no proof that the debt is legitimate
and then proceeds to hound and scare people who don't know their rights into
paying.

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smabie
A cool charity would be one that bought poor people's debt and then forgave
it.

~~~
EliRivers
Such charities exist.

Here's one: [https://ripmedicaldebt.org/](https://ripmedicaldebt.org/)

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throwaway35784
No one. I am debt free. When I paid my last debt off I vowed no more. Getting
a house will take building it myself and I plan to. Already bought the land
with cash. I feel real good about that.

I blame the banks for a lot of what's wrong with society today and refuse to
pay them interest. A personal boycott if you will.

They are unethical and break the law with impunity. Extracting free will from
the populace. It's wrong. The whole system is a lie.

~~~
throwaway23918
Good for you. For many Americans who were born into families living in high
growth areas (California, New York, etc.) a mortgage is often times the only
way to stay in the area close to family, while scraping together some
semblance of financial stability.

I'm curious as to why you think the "whole system is a lie". This sort of
blanket statement seems to discount the fact that banks do in fact serve a
purpose in our society, specifically by providing liquitity.

~~~
lazypenguin
In software, we can generally agree that too many layers of abstraction
introduces many issues since it is difficult to ensure each layer is perfect.
For this imperfection we often pay a price: performance, maintainability, etc.
However I think that often this imperfection is unintended and is a
consequence of trying to make things better.

In the finance world, and particularly with mortgages, there are similarly
many layers of abstraction but each layer has an imperfection built in: money.

Your mortgage, after its gone through all these layers and after everyone had
extracted their pound of flesh from its value along the way ends up looking
nothing like the original product. It might end up as a resecuritized security
based on only the interest portion of a pool of loans or some other
abomination. Just like a JavaScript application is a completely different
beast from the the x86 asm executing on your CPU.

However, in software these layers exist to try to make things better. In the
finance world these layers exist to only make money. To extract value from one
place and move it to another. These layers don’t need to exist in this form
but they do because they make people money. This is the lie.

Despite this, we can’t just remove all these layers at once but maybe we can
remove one layer. Just like you wouldn’t rewrite your nodejs server in asm but
might drop down to Go or something.

Alternatively you can say, “hey I don’t need this website so badly so I’m just
going to not build it” and not play. Or maybe you have the time and
inclination to build it “from scratch” from assembly.

Starting with a plot of land and only the money in your pocket reminds me of
the true hacker spirit! :)

~~~
smabie
Layers exist in finance for the same reason layers exist in programming:
because value is being provided. Or, at least, that’s what the Efficient
Market Hypothesis would say. Maybe you can’t see the value as an outsider, but
you know, Chesterton’s Fence. Only when you see the value of the current
system should you be allowed to change it.

Using the example of mortgage backed securities, they were created to solve
real problems. Mortgages carried risk, were too unique. Also money had a hard
time reaching those who needed mortgages. Most mortgage providers were local
and often there were too many people who wanted mortgages and not enough
money, or the other way around. By packaging mortgages together, you could
reduce risk and sell traunches nationwide.

TLDR: understanding is a prerequisite of change. And just like software, if
you can’t find a reason for why something exists you should probably look
harder. More likely than not, you are the one who doesn’t understand, not the
person who created the thing in the first place.

~~~
lazypenguin
I traded CMO derivatives for several years at a broker dealer that specialized
in MBS and other fixed income products. I’m intimately familiar with the
system and stand by my analogy.

~~~
smabie
I work as a derivative quant/trader in EM (mostly fx swaps and such) and think
that the broker-dealers I transact with provide value. Otherwise, obviously, I
wouldn’t need them! This may be a little controversial, but in most cases,
being paid means you provide value. And when this isn’t true, it almost always
has to do with government regulation.

Anyways, while I don’t have any experience with MBSs, you were probably
providing value even if you didn’t think so.

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undefined3840
What would happen if you transferred your student debt to a credit card and
then declared bankruptcy?

~~~
peter303
You are unlikely to get a high enough credit to cover student loan debt if it
is high. Else everyone would be doing it. Personal loans and HELOCs are even
cheaper and hard to get with bad credit.

~~~
dragonwriter
> You are unlikely to get a high enough credit to cover student loan debt if
> it is high. Else everyone would be doing it.

Well, no, because bankruptcy isn't an option most people want to pursue, and
personal unsecured credit is far more expensive than student loans with the
same principal unless you discharge them in bankruptcy.

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werber
I have a pretty unique last name, and am completely oblivious to bills.
Accidentally stopped paying a credit card after an emergency and the law firm
that sued me employed a cousin I still haven’t met. Still laughing after
paying that one off

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rokhayakebe
Where ex.act.ly can I buy consumer debt?

