Card, Home-Equity Delinquencies Dip for First Time in Many Months

For the first time since the recession began, consumer delinquencies in credit cards and home equity lines of credit have declined, according to a survey released Wednesday.

At midyear, 4.48% of credit card balances were past due by at least 30 days, down from 4.55% at the end of the first quarter, according to the survey of commercial banks by the American Bankers Association The last time the rate declined was in the fourth quarter of 1989; it had risen continously since.

Delinquencies on home equity lines fell to 0.90%, from 0.98%. That rate, too, had risen steadily since it last dropped, in the second quarter of 1990.

These results "tend to indicate that homeowning households are getting their financial situations under control," said Robert Dugger, chief economist for the Washington-based ABA.

Mark Zandi, an economist at Regional Financial Associates, a West Chester, Pa., consulting firm, said: "We may have seen the peak or close to the peak in credit card delinquencies."

With the recession apparently winding down, Mr. Zandi predicted no significant increases in unemployment. As a result, he said, the credit risks faced by consumer lenders should begin to abate somewhat.

Still, bankers and other experts cautioned that it may be months before overall delinquency rates begin to fall. Indeed, the survey showed that a closely followed delinquency rate for seven types of consumer loan rose for the fifth straight quarter - to 2.73%, from 2.67% at the end of March. The composite excludes card loans, home equity lines, and first mortgages.

One of the sharpest rises in delinquencies occurred in "indirect" auto loans, or loans originated through auto dealers. Thirty-day delinquency rates on these loans rose to 2.87%, from 2.66%, remaining well above the 2.25% recorded for auto loans extended directly to consumers

Consumers who got car loans from dealers, rather than from bankers, may feel more comfortable missing payments, said George Williams, a senior vice president at AmSouth Bank, Birmingham, Ala. "They don't know the banker - they didn't meet the banker to get the loan."

Along with both types of auto loan, the ABA's composite loan category includes personal loans, closed-end home equity loans, home improvement loans, and loans for recreational vehicles and mobile homes.

Seasonal Factors Cited

Mr. Dugger said the improvement in credit card delinquencies reflects "more credit stringency by credit card providers, along with greater efforts by borrowers to keep current."

But Mr. Dugger acknowledged that some of the decline may stem from seasonal factors. Borrowers typically fall behind in payments during the first quarter, after holiday shopping and then strive to get current in the second quarter.

"Your best collections are in June, before vacations," said Jerry Craft, executive vice president in charge of credit cards at Wachovia Corp.

Mr. Kraft cautioned against reading too much into the credit card delinquency decline. "We're not projecting any material improvement" for 1992, he said. "We're hopeful, but we're reluctant to do a lot of planning for improvement."

PHOTO : Near the Peak? Consumer delinquency rates. (For cards, based on dollars outstanding. For other loans, based on number of accounts.)

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