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Late payments on home equity loans reached a record in the first quarter after 18 consecutive months of job losses and a struggling economy left more consumers unable to pay their debts, according to the American Bankers Association.
Delinquencies on home equity loans climbed to 3.52% of all accounts from 3.03% in the fourth quarter and late payments on home equity lines of credit climbed to a record 1.89%, the ABA reported. An index of eight types of loans rose for a fourth straight quarter, to 3.23% from 3.22% in October through December.
CCR Newsline reported last week that delinquencies on credit cards rose to 4.75% of total loans during the first quarter ended March 31, from 4.52% in the previous quarter. According to the ABA, more borrowers are using cards to meet daily expenses after losing their jobs. The credit card delinquency rate was 4.51% for the first quarter of 2008. The ABA's report defines delinquencies as payments at least 30 days past due.
U.S. banks issued 9.8 million credit cards from January through April, a 38% decline from the year-earlier period, according to data compiled by Equifax Inc. The average limit on a new card fell 3% to $4,594, Equifax reported.
"There is less equity to draw on, and certainly financial institutions have been scaling back the available lines of credit," says James Chessen, ABA's chief economist. Banks boosted reserves for losses on delinquent loans and have adopted more cautious underwriting policies, he added.
