Banks See Higher HE Delinquencies

Bucking a trend toward credit quality improvement, delinquency rates on home-equity loans and lines of credit increased in the first quarter of this year, according to the American Bankers Association.

The delinquency rate for closed-end home-equity loans increased six basis points from the fourth quarter to 2.43% in the first quarter of 2005, according to the ABA.

The delinquency rate on home-equity lines of credit increased seven basis points to 0.40%.

Despite the increase, home-equity lines of credit continued to have the lowest delinquency rate among all the consumer credit categories tracked by the ABA.

Property improvement loan delinquencies also increased, rising to 2.01% in the first quarter from 1.36% in the last quarter of 2004.

But other categories showed improvement, including credit cards. Banks reported that 4.03% of credit-card accounts were overdue in the quarter, an improvement from 4.20% in the fourth quarter.

And manufactured housing loan delinquencies, perennially one of the worst consumer credit categories, declined to 4.46% from 5.03% in the fourth quarter.

ABA chief economist James Chessen noted that credit-card delinquencies have improved for three consecutive quarters and are now at their lowest level in three years.

He said that despite a 25% increase in gas prices during the first quarter, the environment has generally supported the ability of consumers to meet financial obligations.

"Employment and income growth, combined with historically low interest rates, have balanced out the strain that higher gas prices placed on household budgets. Overall, I'd say consumers are managing debt well," he said in a press release.

Delinquencies on closed-end installment loans, including home-equity loans, increased in the quarter but remain below their 20-year average, he said.

SNAPSHOT: Bank Delinquency Rates

Manufactured Housing Loans 4.46%

Home-Equity Loans 2.43%

Property Improvement Loans 2.01%

Source: ABA

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