The American Bankers Association (ABA) is blaming the dismal economy and low demand for new employment for a rise in consumer loan delinquencies, which have hit record highs.
ABA says that more than two million jobs were lost in the first quarter of 2009, meaning that layoffs now total more than 6 million since the beginning of the recession. As job losses increase, more Americans become unable to make their mortgage payments. The delinquent balances on accounts included in the ABA’s composite of eight different installment loan categories increased to 3.35% in the first three months of 2009, up from 3.16% in the last quarter of 2008, according to the ABA’s most-recent Consumer Credit Delinquency Bulletin.
“The number one driver of delinquencies is job loss,” says James Chessen, the ABA’s chief economist. “When people lose their jobs, they can’t pay their bills. Delinquencies won’t improve until companies start hiring again and we see a significant economic turnaround.”
While stalled mortgage payments are going up, delinquencies in home equity credit are also hitting record highs. Home equity loan delinquencies rose to 3.52%, an increase of nearly half a percentage point from the previous quarter. Delinquencies on home equity lines of credit, meanwhile, jumped 43 basis points to 1.89%.
“Even if home prices stop falling later this year, unemployment will keep home equity delinquencies high for some time,” Chessen added.
The first quarter composite ratio is made up of the following closed-end loans. All figures are seasonally adjusted based upon the number of accounts:
* Home equity loan delinquencies increased from 3.03 percent to 3.52%
* Property improvement loan delinquencies decreased from 1.75 percent to 1.46%
* Indirect auto loan delinquencies decreased from 3.53 percent to 3.42%
* Direct auto loan delinquencies increased from 2.03 percent to 3.01%
* Marine loan delinquencies decreased from 2.35 percent to 2.04%
* RV loan delinquencies increased from 1.38 percent to 1.52%
* Mobile home loan delinquencies increased from 2.96 to 3.70%
* Personal loan delinquencies increased from 2.88 percent to 3.47%
Tags: debt, loan, loan delinquency, mortgage
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