Troubled Asset

DEFINITION of 'Troubled Asset'

Assets for which banks have overpaid such as loans that are made to borrowers who cannot afford to pay these loans back. Troubled assets are often secured by collateral that is valued less than the value of the loan itself. These personal or commercial loans were made to borrowers to cover the cost of homes, automobiles, equipment or various other items of value.

BREAKING DOWN 'Troubled Asset'

In October 2008, the government initiated the Troubled Asset Relief Program (TARP), in an effort to slow down the financial crisis of 2007-2009. The original goal of the fund was to give the U.S Treasury the purchasing power to buy mortgage-backed securities, the troubled assets which were pointed to as the cause of the crises, in order to create liquidity.

Troubled assets can be defined as any residential or commercial mortgages, stocks and bonds, debt or other instruments, based on mortgages that originated or were issued on or before March 14, 2008, which are causing financial market instability.

RELATED TERMS
  1. 100% Mortgage

    A mortgage loan in which the borrower receives a loan amount ...
  2. Commercial and Industrial (C&I) ...

    Any type of loan made to a business or corporation and not to ...
  3. Future Advance

    A clause in a mortgage which enables the lender to advance funds ...
  4. Refinance

    1. When a business or person revises a payment schedule for repaying ...
  5. Problem Loan

    In the banking industry, a problem loan is one of two things; ...
  6. Collateral

    Property or other assets that a borrower offers a lender to secure ...
Related Articles
  1. Credit & Loans

    Commercial Real Estate Loans

    Obtaining a commercial real estate loan is quite different from borrowing for residential real estate. Here's what to expect and how to get what you need.
  2. Home & Auto

    Financing Basics For First-Time Homebuyers

    If you're looking to get your first mortgage, there are many financing options available.
  3. Credit & Loans

    Personal Loans vs. Car Loans

    How to tell whether a personal loan or a car loan is better for you.
  4. Credit & Loans

    Why It’s So Hard to Get Small Mortgage Loans

    Finding a lender to provide a mortgage loan for less than $50,000: It's a challenge faced by a surprising number of people, and one that's often tough to solve.
  5. Credit & Loans

    What Is Collateral?

    Collateral is property or other assets that a borrower offers a lender to secure a loan. If the borrower stops making the promised loan payments, the lender can seize the collateral to recoup ...
  6. Credit & Loans

    8 Top Alternatives to Car Title Loans

    Before you sign up for a car title loan, investigate these 8 alternate strategies.
  7. Credit & Loans

    All About Government Loans

    There are many reasons to seek a government loan rather than one from a private lender. Government loans typically have low interest rates and offer fixed or subsidized options, as well as deferred ...
  8. Credit & Loans

    What are the Five C's of Credit?

    The five C’s of credit are what banks and other lenders evaluate about a potential borrower when making a lending decision. The five C’s are Character, Capacity, Capital, Collateral and Conditions. ...
  9. Entrepreneurship

    The New Mortgage Business: More Than Just Loans

    Many mortgage brokers adapted to the post-subprime environment by becoming loan modification specialists.
  10. Options & Futures

    Lending Clubs: Better Than Banks?

    If you need to borrow money and your credit is making it tough, this new option may be just what you're looking for.
RELATED FAQS
  1. What are the pros and cons of life insurance policy loans?

    Find out the pros and cons of borrowing against your life insurance policy to help you decide if this loan type is the right ... Read Answer >>
  2. What are the differences between delinquency and default?

    Find out more about loan delinquency, loan default, and the difference between a loan borrower defaulting and being delinquent ... Read Answer >>
  3. What is the difference between secured and unsecured debts?

    Learn the differences between secured and unsecured debt; discover how banks buffer risks associated with each type of loan ... Read Answer >>
  4. What is the difference between asset-based lending and asset financing?

    In the most common usage, the terms "asset-based lending" and "asset financing" refer to the same thing. Asset-based lending ... Read Answer >>
  5. How do commercial banks make money?

    Learn the different ways commercial banks make money, including interest from loan products and banking fees charged to customers. Read Answer >>
  6. What are some examples of debts that I can consolidate?

    Read about different kinds of debts than can be combined into a consolidation loan, including unsecured debts, secured debts ... Read Answer >>
Hot Definitions
  1. Goldilocks Economy

    An economy that is not so hot that it causes inflation, and not so cold that it causes a recession. This term is used to ...
  2. White Squire

    Very similar to a "white knight", but instead of purchasing a majority interest, the squire purchases a lesser interest in ...
  3. MACD Technical Indicator

    Moving Average Convergence Divergence (or MACD) is a trend-following momentum indicator that shows the relationship between ...
  4. Over-The-Counter - OTC

    Over-The-Counter (or OTC) is a security traded in some context other than on a formal exchange such as the NYSE, TSX, AMEX, ...
  5. Quarter - Q1, Q2, Q3, Q4

    A three-month period on a financial calendar that acts as a basis for the reporting of earnings and the paying of dividends.
  6. Weighted Average Cost Of Capital - WACC

    Weighted average cost of capital (WACC) is a calculation of a firm's cost of capital in which each category of capital is ...
Trading Center