March 31, 2007
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NEWS: Late Loan Payments Up; Cards Hold SteadyA news report this week by Reuters indicated that Americans are, overall, having trouble paying their home equity loans. That bad news is tempered by the fact that credit card late payments are more or less stable. This duality suggests that the troubled sub-prime market has yet to make enough of an impact that there is a significant shift in Americans' ability to pay their bills on time.
The American Bankers Association (ABA) conducts research each quarter on national consumer borrowing; this time around, home equity loan delinquencies rose from 1.79% to 1.92%. Furthermore, late car loan payments hit a record 5.5 year high this past quarter. On the other hand, credit card late payments actually dipped very modestly from the last quarter's 2 year high of 4.57% to 4.56%. ABA's Chief Economist, James Chessen, states that while the jump in home equity loan delinquencies is certainly grounds for concern, those increases still bring the rate in lower than it was about three years ago.
The ABA compiles its data from surveys of over 300 financial institutions nationwide. For ABA's conditions, payments are late if they are over 30 days outstanding. Many of the proposed explanations for the rise in loan delinquencies pointed to consumer distress over rising sub-prime mortgage default rates. The Mortgage Bankers Association announced earlier this month that fourth quarter foreclosure rates were at an all-time record high – one in every 200 American mortgages.
The ABA also released other details of their report: delinquencies on property improvements and mobile homes dropped, boat and RV late payments went up, and personal loan late payments stayed about the same.
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