Lesson 24 of 25 · 8 min
What the episodes share: capacity, a line, a clock
Every episode is a position, a term, a move, a test, and a recovery whose speed was priced.
Track 11 lesson 1 gave every deleveraging episode the same skeleton: a position, a financing arrangement, a move, a demand with a deadline, a sale into the move. Lessons 18 to 23 are that skeleton on household products. The position is a car or a house or an unsecured stack. The financing is a term, a rate, an option payment, a chapter path. The move is a price, a rate, or an income. The test is a due date, a recast, a means line, a maintenance comparison. The recovery is a process whose speed was priced on day one: weeks on a car, months on a house, a court clock on a filing.
Option ARMs in 2007 were a financing term plus a rate move plus a recast test. The 2008–2010 wave was a price move, LTV through 100 percent, a missed cash date, a months-long sale. 2009 modifications reprinted the installment; 2020 forbearance paused the due date and later capitalized it. 2005 wrote an income test into the chapter clocks. 2016–2017 auto was day-one LTV above 100 percent plus a weeks-long taking. The years differ. The five steps do not.
An invented unifying book, the Track 22 lesson 11 car. Cash price $31,460, $0 down, 84 months, 7.9 percent, payment $488.78. After 12 months the mark is $24,538.80 and the balance is $27,954.91, LTV 113.9 percent. A missed payment then starts lesson 11's 22-day taking clock. Capacity is what the car can support. The line is LTV and the due date. The clock is 22 days because the collateral is a car. The rules that govern taking vary by state, and a reader's own situation belongs with a qualified professional.
Position, financing, a move, a test, a recovery whose speed was priced on day one. That is every episode in this track. The 22-day taking is the sale into the move.
Key terms
- Five-step skeleton
- Track 11 lesson 1: position, financing, a move, a demand, a sale into the move. Household form in lessons 18 to 23.
- Capacity, line, clock
- What the collateral can support, the test that is applied, and how fast recovery runs. The next lesson's three parts.
- Priced recovery speed
- Weeks on a car, months on a house, a court clock on a filing. Track 1 lesson 2, on each episode.
Worked example
The $31,460 car, month 12, then a miss
Illustrative figures scaled down so the arithmetic is followable; they are not the reported amounts. $31,460, $0 down, 84 months, 7.9 percent, payment $488.78. Month-12 mark $24,538.80, balance $27,954.91. Then a missed payment starts the 22-day taking clock of lesson 11. Rules vary by state.
- Position and financing
- $31,460 at $0 down, 84 months, 7.9%
- Move, by month 12
- Mark $24,538.80
- Line at month 12
- LTV 113.9%
- Test that starts recovery
- A missed payment
- Clock
- 22 days to taking
Payment $488.78.
Depreciation, not a miss.
$27,954.91 ÷ $24,538.80.
The cash-date comparison.
Lesson 11, because the collateral is a car.
Month 12 already prints LTV of 113.9 percent. The miss starts a 22-day clock. Capacity, a line and a clock were all visible before the taking.
Check yourself
On the invented $31,460 book, month 12 prints a $27,954.91 balance and a $24,538.80 mark. What is LTV, what starts the 22-day taking clock, and what five-step skeleton is that?
Every episode is Track 11 lesson 1's five-step skeleton on a household asset: position, financing, a move, a demand, a sale into the move. Open How to read a deleveraging episode: the sequence, not the villain →
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Educational only. Nothing in this lesson is investment, legal or tax advice, or a recommendation to enter into any transaction. Figures are illustrative and computed from the inputs stated in the lesson.