"During the great housing boom, homeowners nationwide borrowed a trillion dollars from banks, using the soaring value of their houses as security. Now the money has been spent and struggling borrowers are unable or unwilling to pay it back," according to a front-page article by David Streitfeld in today's edition of The New York Times.
"The delinquency rate on home equity loans is higher than all other types of consumer loans, including auto loans, boat loans, personal loans and even bank cards like Visa and MasterCard, according to the American Bankers Association," the article said.
"Lenders say they are trying to recover some of that money but their success has been limited, in part because so many borrowers threaten bankruptcy and because the value of the homes, the collateral backing the loans, has often disappeared. The result is one of the paradoxes of the recession: the more money you borrowed, the less likely you will have to pay up," the article said.
The article said that "Lenders wrote off as uncollectible $11.1 billion in home equity loans and $19.9 billion in home equity lines of credit in 2009, more than they wrote off on primary mortgages, government data shows," adding that "So far this year, the trend is the same, with combined write-offs of $7.88 billion in the first quarter."
The article stated that "even when a lender forces a borrower to settle through legal action, it can rarely extract more than 10 cents on the dollar" and quoted Clark Terry, chief executive of Utah Loan Servicing, a debt collector that buys home equity loans from lenders, that "anything over $15,000 to $20,000 is not collectible."
"The delinquency rate on home equity loans was 4.12 percent in the first quarter, down slightly from the fourth quarter of 2009, when it was the highest in 26 years of such record keeping. Borrowers who default can expect damage to their creditworthiness and in some cases tax consequences," the article said.
"The delinquency rate on home equity loans is higher than all other types of consumer loans, including auto loans, boat loans, personal loans and even bank cards like Visa and MasterCard, according to the American Bankers Association," the article said.
"Lenders say they are trying to recover some of that money but their success has been limited, in part because so many borrowers threaten bankruptcy and because the value of the homes, the collateral backing the loans, has often disappeared. The result is one of the paradoxes of the recession: the more money you borrowed, the less likely you will have to pay up," the article said.
The article said that "Lenders wrote off as uncollectible $11.1 billion in home equity loans and $19.9 billion in home equity lines of credit in 2009, more than they wrote off on primary mortgages, government data shows," adding that "So far this year, the trend is the same, with combined write-offs of $7.88 billion in the first quarter."
The article stated that "even when a lender forces a borrower to settle through legal action, it can rarely extract more than 10 cents on the dollar" and quoted Clark Terry, chief executive of Utah Loan Servicing, a debt collector that buys home equity loans from lenders, that "anything over $15,000 to $20,000 is not collectible."
"The delinquency rate on home equity loans was 4.12 percent in the first quarter, down slightly from the fourth quarter of 2009, when it was the highest in 26 years of such record keeping. Borrowers who default can expect damage to their creditworthiness and in some cases tax consequences," the article said.
Architecture Critic
Carter Horsley
Since 1997, Carter B. Horsley has been the editorial director of CityRealty. He began his journalistic career at The New York Times in 1961 where he spent 26 years as a reporter specializing in real estate & architectural news. In 1987, he became the architecture critic and real estate editor of The New York Post.
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