Home Equity Overdues Drop at Banks

Banks reported significantly lower consumer loan delinquencies during the first quarter, with home-equity products participating strongly in the improvement.

The home-equity loan delinquency rate fell 13 basis points from the fourth quarter to 2.37% at the end of the first quarter, according to the ABA consumer credit delinquency bulletin.

The delinquency rate on home-equity lines of credit also declined 14 basis points to 0.29%. HELOCs continued to have the lowest delinquency rate among the consumer credit categories tracked by the ABA.

The news was not so good for manufactured housing loans. The mobile home delinquency rate increased to 5.93% from 5.56% three months earlier.

Overall, consumer credit improved for most categories of credit, including credit card debt.

"After two quarters of record-high delinquencies, this may be the break in the clouds we've been looking for," said ABA chief economist James Chessen.

And 4.21% of credit card accounts were overdue in the first quarter, down from an all-time high of 4.43% in the fourth quarter of 2003. The composite ratio of closed-end installment loans that were 30 days or more past due also declined, but only by three basis points, reaching 1.89% in the first quarter. The composite ratio includes auto loans, personal loans, home-equity loans, home-improvement loans, recreational-vehicle loans, mobile loans and marine loans. Open-ended accounts such as HELOCs and credit cards are excluded from the composite.

Mr. Chessen said that job and income growth in 2003 and early 2004 are starting to pay dividends. With more than one million jobs created since January, the ratio of financial obligations to disposable income has improved.

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