Growing stress in the housing sector and more lenient underwriting standards have contributed to indirect auto loan delinquencies jumping to a 16-year high, according to the American Bankers Association (ABA).
“We’re also seeing the maturity structure for car loans becoming progressively longer and borrowers are becoming more and more upside down. Loan-to-value ratio has also been rising,” said Keith Leggett, a senior economist for the ABA.
The ABA reported that delinquencies on indirect auto loans in the third quarter of 2007 (those that were at least 30 days overdue) were the highest they have been since 1991, when indirect auto loan delinquencies hit 2.87%. Delinquencies on direct auto loans, on the contrary, were down from the same time a year ago. All numbers were seasonally adjusted. “We’re expecting continued increases in delinquencies across the broad spectrum of consumer loan products,” Leggett said. “Weak job numbers in the fourth quarter of 2007 have an impact on individuals’ ability to make timely payments. This will translate into 2008 and there will be continued stress in the consumer sector.”
