PHOENIX — 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.
The delinquency rate on home-equity loans is higher than on all other types of consumer loans, including auto loans, boat loans, personal loans and bank cards such as Visa and MasterCard, according to the American Bankers Association.
Lenders say they are trying to recover some of that money, but their success has been limited. Partly, this is because so many borrowers threaten bankruptcy, and the collateral in the homes 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.
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 show. So far this year, the trend is the same, with combined write- offs of $7.88 billion in the first quarter.
Even when a lender takes legal action, it can rarely extract more than 10 cents on the dollar. The New York Times
