Junk the Mortgage, Save the Car

Confirming what has been suspected for some time now, an analysis by Equifax has found that many financially strapped consumers are no longer paying their mortgages first. In previous down cycles, borrowers have given their homes their highest priority. At least that's the traditional industry consensus. But a look at both 2002 and 2005 vintage loans revealed that "more consumers are letting their houses go," David Whitin of Equifax Analytical Services, Orange Park, Fla., reported at the Consumer Bankers Association's annual Home Equity Lending Conference in Austin, Texas. Delinquent borrowers who took out their home loans in 2005 are more likely to have clean slates when it comes to their credit cards and auto loans than tardy borrowers who got their loans three years earlier, Mr. Whitin told the conference. Equifax also found that borrowers in the six states with the largest price declines -- Arizona, California, Florida, Massachusetts, Maryland, and New York -- are more likely to fit that description than those in other states. Another key finding: borrowers who have trouble paying their mortgages but manage to make their credit card and car payments tend to have larger mortgages than those who fail to meet any of the three obligations. Mr. Whitin's conclusion: "Lenders need to make some changes to make this kind of behavior more unattractive."