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Consumer loan delinquencies declined in 4Q
WASHINGTON (4/8/10)--Consumer loan delinquencies declined in eight of 11 loan categories in fourth quarter 2009, marking the second consecutive quarter of broad-based improvement, according to the American Bankers Association’s (ABA) Consumer Credit Delinquency Bulletin. While credit union members’ loan delinquencies went up in the quarter, credit unions still saw fewer delinquencies than banks, said the Credit Union National Association (CUNA). ABA’s composite ratio, which tracks eight closed-end installment loan categories, fell four basis points to 3.19% of all accounts, compared with 3.23% of all accounts in the previous quarter. Bank card delinquencies dropped 38 basis points to 4.39% of all accounts, which is below the five-year average--4.52%. The report defines a delinquency as a late payment that is 30 days or more overdue. ABA Chief Economist James Chessen said the news is a strong indication that the economy is on an upswing. “The fall in consumer delinquencies is a very positive and hopeful sign,” he said. "Clearly, consumers are shoring up their finances, and banks are putting losses behind them. Overall, there is a prudent approach to credit.” Credit union consumer loan delinquency rates rose to 1.67% in the fourth quarter--up 12 basis points from the previous quarter, Steve Rick, CUNA senior economist, told News Now. “This is roughly half the 3.19% consumer loan delinquency rate reported by banks,” Rick said. “Credit union first-mortgage delinquency rates rose to 2.12%, up from 1.93% in the third quarter. We expect delinquency rates to fall in the summer of 2010 as job growth picks up steam. Economic indicators already are signaling a labor market turnaround. “March payroll numbers rose 162,000, according to the establishment survey of larger firms, the third time in the last five months the economy created more jobs than it lost,” he added. “The household survey--which includes small and start-up businesses--is reporting an even stronger labor market recovery. The Bureau of Labor Statistics reported a 264,000-job gain in March, the third consecutive month of job creation.” In the auto-loan categories, direct loan delinquencies fell 10 basis points to 1.94% of all accounts, ABA said. Indirect auto loan delinquencies--arranged through auto dealers--remained even at 3.15% of all accounts. Housing-related loans showed mixed results, ABA said. Home equity loan delinquencies hit another record, rising to 4.32% of all accounts, compared with 4.30% in the previous quarter. Conversely, home equity lines of credit delinquencies at quarter-end fell for the first time in six quarters to 2.04% of all accounts, compared with 2.12% in the previous quarter. “This first sign of improvement has been a long time coming and is finally some positive indication that the housing market is stabilizing,” Chessen said. He agreed with CUNA’s Rick that while most consumers appear to be handling their finances well, the level of consumer credit delinquencies still is heavily tied to job creation. “People are actively reducing their level of debt relative to their income and are rebuilding their savings,” Chessen said. “But it’s still a very stressful time for many families and this won't disappear until more people have jobs. This will keep delinquencies elevated for the next several quarters.”
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