Wednesday, July 4, 2007

Delinquencies are Up in Q1 According to the ABA

According to the ABA (American Banker’s Association) delinquencies on consumer debt were up in Q1. The increase from the previous quarter was led by real estate loans. The increase in delinquencies for the various consumer products varies, but is generally on the order of 10%. From Market Watch:

More Americans fell behind on their debt payments in the first quarter than at any time since the 2001 recession, despite fewer delinquencies on credit-card debts, the American Bankers Association reported Tuesday.

Delinquencies of all types of consumer loans rose to 2.42% in the first quarter from 2.23% in the fourth quarter, led by higher rates of late payments for real-estate loans. It's the highest delinquency rate for the bankers' composite delinquency index since the second quarter of 2001.

Delinquencies of credit-card debts fell to 4.41% of all accounts from 4.56% in the fourth quarter, however. Accounts are considered delinquent if payments are 30 days overdue.

Based on experience as a banker, consumers will often protect a source of borrowing during difficult times. For example, if a consumer knows they might lose your home or you may file for bankruptcy the consumer will make sure all their credit cards are current, because this provides them with an alternate source of borrowing.

Delinquencies on home-equity loans rose to 2.15% from 1.92%. Delinquencies on property-improvement loans rose to 1.61% from 1.29%. Mobile-home loans saw their rate of delinquencies rise to 2.94% from 2.82%.

Delinquencies on direct auto loans fell to 1.68% from 1.85%, while indirect auto-loan delinquencies rose to 2.73% from 2.57%.

Delinquencies on personal loans rose to 2.08% from 1.91%.

"The good news is that credit-card delinquencies fell during the first quarter of 2007," said James Chessen, the ABA's chief economist. "The improvement in credit card late payments is somewhat remarkable, given that the economy was not operating on all cylinders."

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