A trillion on home equity lines that was loaned out is not being payed back.
The delinquency rate on home equity loans was 4.12 percent in the first quarter if 2010 — this was down slightly from the fourth quarter of 2009 but man that’s not good news for banks. These default rates are the highest in 24 years of such record keeping….
Home equity loans default rates are worse than auto loans, boat loans, personal loans and even bank cards like Visa and MasterCard, according to the American Bankers Association.
Why are lenders hard pressed to reclaim the loaned money?
In reading various articles today to find a consensus I came to the opinion that it is because so many borrowers threaten bankruptcy and the equity or collateral once that existed in the homes backing the loans is now long long gone and surely disappeared.
Equity gone means “people no pay back” .
So the truth being fleshed out is: the more money you borrowed in the boom means you will likely have to pay back less !!
Lenders wrote off as uncollectible $10 plus billion in property equity loans and $18 plus billion in home equity lines of credit in 2009 alone!
That trend is continuing in 2010 with almost eight billion being written off in the first quarter already.
Lenders are having a very hard time getting judgements and buyers to pay up. It is likely from reading the bank literature on this subject, that lenders will actually collect more than twenty percent if this money they lent out !
The largest amount of home equity debt that might still go sour is on the books of the big boys : including Bank of America, Citigroup and JPMorgan Chase.
I think they will have o keep charging overdraft fees to all of us to pay for their mistakes.