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Just a week ago, Carlyle Capital warned the market that it had begun to receive default notices after getting margin calls for additional collateral from lender banks.
FORBES: Magazine Article
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Just a week ago, Carlyle Capital (other-otc: CARYF - news - people ) warned the market that it had begun to receive default notices after getting margin calls for additional collateral from lender banks.
FORBES: LONDON
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Many banks have transferred credit-card loans to home-equity loans, which are tax-deductible for the borrower and offer collateral for the lender.
ECONOMIST: The bigger they are
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Repurchase agreements are canceled, the lender taking the collateral.
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Leucadia was trying to collect on unsecured debt, where there is no collateral and little recourse for the lender.
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But it is far less than the haircuts being imposed in the current environment, and the lender has a claim to the appreciation of the collateral--a claim that could be packaged, priced and sold.
FORBES: Home Truths
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The question becomes how much more the lender wants to spend on legal fees to gain clear title to the collateral.
FORBES: Court Decision Gives Lenders A Headache, Borrowers An Ace In The Hole
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When a cash-rich party enters the market as a lender, it expects its counterparty, the borrower, to put up collateral bonds as protection against default.
ECONOMIST: Repurchase agreements
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Since the deposit acts as collateral, you can get the credit card at low risk to both you and your lender, so approval is likely to be easy, regardless of how bad your credit is.
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The lender also has a very strong incentive to properly assess the value of the underlying collateral.
FORBES: Home Truths
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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).
FORBES: Magazine Article