Friday, August 13, 2010

Not Collectible

Utah Loan Servicing is a debt collector that buys home equity loans from lenders. Clark Terry, the chief executive, says he does not pay more than $500 for a loan, regardless of how big it is.
“Anything over $15,000 to $20,000 is not collectible,” Mr. Terry said. “Americans seem to believe that anything they can get away with is O.K.”  The above is a quote from the NY Times article at:
 Debts Rise, and Go Unpaid, as Bust Erodes Home Equity
begin next quote.
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.


end quotes.

It appears that if even a loan collector won't pay over $500 for a loan to collect on and nothing over $15,000 to 20,000 is collectible that we definitely are in a "Brave New World" regarding home equity nationwide. And if unemployment gets worse as leading indicators now say, equity, at least as we knew it in the past may itself become to a certain degree a thing of the past. No wonder the banks are buying treasuries instead of making new loans. It's probably the only way banks can stay in business and not go under or bankrupt the way things presently are.

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