That is because cars depreciate faster than the loan balance, resulting in the collateral value of the car being less than the outstanding balance.
They were on hook to Credit Suisse for a substantial loan and needed to find a way quickly to boost the collateral value of their assets.
Consider this one: The loan portfolios and the value of collateral held to cover lost loans continue to lose value.
The shared appreciation feature gives the lender the right to the first, say, 40% of the appreciation of the collateral above the value of the debt over some specified future time period (say five or 10 years).
Meanwhile, the rise in the value of collateral, such as property, increases the willingness of banks to lend.
Unfortunately, as it generally does, the housing market kept going down and the value of collateral kept going down.
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Rising house prices lift the market value of collateral on banks' existing loans, so they are willing to lend more, pushing prices higher.
In Diebold's case, like many others, his 401(k) plan appears to be contractually on the hook for any decline in the value of collateral received in exchange for the securities it lent out.
At many rivals the figure is 80% and rising, thanks to the falling value of the collateral.
When the value of your collateral falls below what you owe, you need to put up more collateral.
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Indebted investors are also being forced by their banks to sell as falling prices reduce the value of their collateral.
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In a boom, rising property prices increase the value of the collateral held by banks, which makes them more willing to extend credit.
The lender also has a very strong incentive to properly assess the value of the underlying collateral.
Basuki, the South Kalimantan businessman, says banks typically ask for collateral worth 90% of the value of the loan from small businesses.
Writing a loan down, on the other hand, means that it stays on the bank's balance sheet at a reduced but perhaps still inflated value, and the collateral backing the loan is not sold.
And the greater the delay in tackling the zombie companies by breaking up and selling off corporate bits with any value, putting seized collateral (usually property) on the market, and liquidating companies that are not worth anything the longer the region will take to make a full economic recovery.
Meanwhile, to get a bank loan, one must put up 150% -200% of the face value of the loan in collateral, plus get three guarantors with good incomes.
Meanwhile, to get a bank loan, one must put up 150% to 200% of the face value of the loan in collateral and get three guarantors with good incomes.
Carlyle Capital that said while its parent company had participated "actively" in negotiations with lenders and was prepared to provide substantial additional capital if a successful refinancing deal could be reached, negotiations had deteriorated on Wednesday when a pricing service used by some lenders reported a drop in the value of the assets' collateral.
Not only have many of those assets dropped substantially in value, the banks also hold collateral against loans and borrowers.
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But banks can make only rough guesses at the value of swaps and thus how much collateral their counterparties need to ante up.
Regulators could instruct lenders that the combined maximum loan amount should not exceed 85% of the moving-average value of a property, offered as collateral, over the preceding four to six years.
The bonds initially were issued at a price that represented about 60% of the fair market value of the airliners being leased, meaning an investor buying the bonds at 70 cents on the dollar is getting the underlying collateral for about 40% of its original market value.
The latter collateral will come into play only where the cash surrender value of the policy is insufficient to meet the debt obligation.
The bank must then set aside yet more reserves if the collateral mostly raw land falls further in value.
It might also hurt the value of the land that local governments have offered as collateral for their borrowings.
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She applied for a loan equal to the full value of the land but does not put up any collateral.
The securities the fund holds are rarely publicly traded and often are subject to collateral agreements that contain terms that must be considered in establishing their value.
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If the Federal Reserve continues to raise interest rates, farmers will be doubly hurt as the value of their land, which could be used as collateral, also falls.
Weak banks in peripheral countries remain vulnerable to a downward spiral in which their holdings of government bonds are downgraded and fall in value, forcing them to come up with ever more collateral to keep borrowing from the central bank.
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