Home Equity Loan Delinquencies Fall for First Time in Two Years: ABA

Housing-related loan delinquencies improved across the board in the first quarter of 2010, the American Bankers Association (ABA) recently reported.


According to ABA’s first quarter Consumer Credit Delinquency Bulletin, home equity delinquencies fell for the first time in two years to 4.12 percent of all accounts, down from 4.32 percent the previous quarter. During the same period, home equity lines of credit delinquencies fell to 1.81 percent from 2.04 percent, and property improvement loan delinquencies fell to 1.4 from 1.63 percent.

James Chessen, ABA chief economist, said the sweeping improvements in housing-related loan delinquencies indicate stability is returning to the housing market. “This is the first inkling that stability is taking hold in the housing market, but the pace of recovery will still be long and drawn out,” he noted.

In addition to the decline in housing-related loan delinquencies, consumer loan delinquencies as a whole showed broad-based improvement for the third quarter in a row. ABA’s report found that the composite ratio, which tracked delinquencies in eight closed-end installment loan categories, fell to 2.98 percent of all accounts during the first quarter, down from 3.19 percent the previous quarter.

Bank card delinquencies fell to 3.88 percent from 4.39 percent, marking the first time since the second quarter of 2002 that bank card delinquencies have fallen below 4 percent. In addition, direct auto loan delinquencies fell from 1.94 percent to 1.79 percent, and personal loan delinquencies fell from 3.63 percent to 3.61 percent.

Chsess said the improvements reflect concerted efforts be consumers to “shore up” their finances. He said consumer balance sheets are clearly improving as people are borrowing less, saving more, and building wealth.

“The overall risk in banks’ consumer loan portfolios is improving and will continue to do so,” Chessen said. “Banks are putting losses behind them and following a prudent approach to new loans because the on-again, off-again economy is keeping risk high. Regulators are also demanding that banks remain cautious. With job growth creeping back slowly and personal incomes rising a bit, I’m hopeful that improvements in consumer delinquencies will continue.”



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