Delinquency rates on closed-end second mortgages are falling dramatically, according to a new report by the American Bankers Association.
The 30-day delinquency rate on second mortgages fell to 3.72% in the first quarter, down 31 basis points from the fourth quarter and down 48 bps from the third quarter of 2012.
ABA chief economist James Chessen noted the improvement in payments is a function of jobs and rising house prices.
“We have had a steady improvement in jobs” over the past year, he said. “It means people have a greater capacity to repay their debts.”
The ABA chief economist also noted the consumers have reduced their debt load.
Meanwhile,
“HELOCs are resetting to their amortization period which has created some payment shock,” Chessen said.
Federal Deposit Insurance Corp. first-quarter data show federally insured depositories held $538.4 billion in HELOCs and 0.83% of those credits are 30 to 89 days delinquent. Net charge-offs totaled $1.95 billion in the first quarter, down from $2.5 billion in the prior quarter.
Banks and thrifts held $1.8 trillion in closed-end second mortgages with a 30- to 89-day delinquency rate of 2.12% at the end of the first quarter. Net charge-offs totaled $2.4 billion in the first quarter, compared to $2.9 billion in the prior quarter.
