Billions of dollars in student loans may be wiped out for tens of thousands of borrowers in the US because a lender didn’t keep track of the paperwork verifying ownership of the loans, according to The New York Times.

The National Collegiate Student Loan Trusts, which holds 800,000 private loans and is one of the country’s largest owners of private student loans, is at the center of the legal dispute, The Times reports.

Borrowers are failing to repay more than $5 billion of the $12 billion in private student loans held by National Collegiate, sending the loans into default. The organization has brought more than 800 lawsuits against borrowers this year alone in pursuit of repayment — and National Collegiate usually wins because borrowers either choose to settle or don’t show up in court, according to The Times.student loans, billions dismissed

When borrowers do show up to fight, the cases are not so straightforward. Disorganized or missing paperwork has made it difficult for National Collegiate to prove it does indeed own the defaulted loan it’s demanding repayment on, according to The Times. To be clear, The Times reports, the organization’s legal problems don’t include falsifying documents.

The student loans held by National Collegiate were made “more than a decade ago by dozens of different banks, then bundled together by a financing company and sold to investors through a process known as securitization,” and they weren’t guaranteed by the federal government, according to The Times.

Donald Uderitz, the founder of Vantage Capital Group, a private-equity firm in Delray Beach, Florida, is one of the financiers behind National Collegiate’s trusts, and even he appears to be confused by the missing paperwork. In 2015, he hired a contractor to audit the servicing company that bills National Collegiate borrowers each month and found that not one of 400 randomly sampled loans had the documents showing a chain of ownership.

“It’s fraud to try to collect on loans that you don’t own,” Uderitz told The Times. “We want no part of that. If it’s a loan we’re owed fairly, we want to collect. We need answers on this.”

Private student loans lack the consumer protection and manageable interest rates that come with federal student loans, now a $1.3 trillion market. Because of steep interest rates on private loans, borrowers can often end up paying hundreds — and in some cases thousands — of dollars in monthly payments.

Notably, federal student-loan borrowers have the ability to apply for loan forgiveness or a loan discharge, such as in the case of an incomplete degree from a defunct for-profit college, while private borrowers do not.

Read the full story at The New York Times »

mortgage, student loan, debtFor millions of Americans drowning in student loan debt, the prospect of getting a mortgage might seem out of reach. Last week, Fannie Mae changed underwriting rules that could make it much easier for people with student loan debt to qualify for a mortgage. Here are the details.

Who Does This Impact? 

The new rule impacts people with federal student loan debt who are currently on an income-driven repayment program. An income-driven repayment plan sets your monthly student loan payment at an amount that is intended to be affordable based upon your income and family size. Depending upon the plan, your monthly payment could be capped as low as 10% of your discretionary income. And if your discretionary income is low enough, your monthly payment could be as low as $0.

What Has Changed? 

In order to qualify for a mortgage, a borrower needs to meet certain debt-to-income (DTI) requirements. That seems simple enough. However, there was confusion regarding federal student loan debt on an income-driven repayment program. When calculating a debt burden, should the underwriter include the standard student loan payment, the reduced payment, or something in between?

The new statement from Fannie Mae makes it clear:  the reduced payment can be used, even when the payment is $0. According to Fannie Mae, “if the lender obtains documentation to evidence the actual monthly payment is $0, the lender may qualify the borrower with the $0 payment as long as the $0 payment is associated with an income-driven repayment plan.”

This is important, because the payment calculation for a student loan (10% of the discretionary income) is different from the DTI requirement of a mortgage. Many Americans could find it easier to qualify for a mortgage while in student loan debt.

Michigan-based mortgage broker Cassandra Evers told MagnifyMoney that the changes “allow a lot more borrowers to qualify for a home.” Previously, there was a lot of confusion among borrowers, lenders, and brokers, Evers said. “[The rules have] changed at least five or six times in the last five years.”

Original Source: https://www.forbes.com/sites/nickclements/2017/07/31/new-rule-makes-it-easier-to-get-a-mortgage-with-student-loan-debt/#ca48ae2173d7