Consumers are paying down their debts across an increasing number of loan categories, according to the American Bankers Association.

The financial services trade group released third-quarter consumer delinquency data on Thursday for 11 loan categories, reporting that delinquencies had declined across seven of those categories.

That was a welcome reversal for the banking industry, which in the second quarter saw the ABA report an uptick in delinquencies across nine of the 11 loan categories it tracks.

"For banks, it is a sign that a lot of the problems are being put behind them," James Chessen, the ABA's chief economist, told American Banker in an interview on Wednesday. "It's just that process of working through the problem loans and putting good loans in their place."

The decline in delinquencies could encourage banks to boost their consumer lending, he adds.

"Banks are more willing to lend as they see consumers with greater savings, greater discipline on the level of debt they maintain and a more positive outlook for the economy," Chessen says.

The ABA's composite ratio, which includes delinquency rates for eight closed-end, or fixed installment, loan categories, fell to 2.59% from 2.88% last quarter and from 3.01% a year prior.

Delinquencies fell across seven of the loan categories tracked by the ABA, including two of the largest categories. Delinquencies on indirect auto loans, or those arranged through a third party like an auto dealer, fell to 2.6% from 2.89% a quarter prior, and delinquencies on closed-end home equity loans fell to 4.12% from 4.38% last quarter.

"The real issue for me going forward is what happens on the housing side," says Chessen. "Everybody's looking for a recovery in the housing market, and I think there are some signs of stability. I think we're going to see some improvement in sales and hopefully a stabilization of home prices."

The ABA defines delinquency as a late payment that is 30 days or more overdue. Delinquency rates are seasonally adjusted.

Consumers also made fewer late payments this quarter on personal loans and direct auto loans, as well as on loans for RVs, marine vessels or property improvements.

But more consumers with mobile home loans are falling behind on payments, which Chessen says is a potentially worrisome trend. The delinquency rate for that group rose to 4.08%, up from 3.62% last quarter.

Mobile home loans are "often a proxy for lower-income borrowers," says Chessen, adding that a rise in that category "gives some indication about stress at somewhat lower levels of income. I always cringe a little when that goes up."

The ABA also tracks delinquencies in three categories of open-end loans, or lines of credit: home equity lines of credit, non-card revolving loans and bank cards.

Home equity and bank card delinquencies remained "virtually flat" with movements of just a few basis points, says Chessen, while the smaller category of non-card revolving loan delinquencies grew to 1.43% from 1.11%.

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