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Consumer loan delinquencies fell in eight of 11 loan categories in the fourth quarter of 2009, marking the second quarter in a row of broad-based improvement, according to the Consumer Credit Delinquency Bulletin released Wednesday by the ""American Bankers Association"":http://www.aba.com/default.htm (ABA).
[IMAGE]ABA Chief Economist James Chessen said the news is a strong indication that the economy is on an upswing.
""The fall in consumer delinquencies is a very positive and hopeful sign,"" he said. ""Clearly, consumers are shoring up their finances and banks are putting losses behind them. Overall, there is a prudent approach to credit.""
The results for housing loans, though, were mixed. Home equity loan delinquencies hit another record, rising to 4.32 percent of all accounts compared to 4.3 percent in the third quarter. By contrast, home equity lines of credit delinquencies fell to 2.04 percent of all accounts in the fourth quarter from 2.12 percent the previous quarter, marking the first decline in six quarters.
""This first sign of improvement has been a long time coming and is finally some positive indication that the housing market is stabilizing,"" Chessen said.
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The composite ratio, which tracks eight closed-end installment loan categories, fell four basis points to 3.19 percent of all accounts compared to 3.23 percent of all accounts in the third quarter of last year.
Six of these categories saw quarter-to-quarter increases. Direct auto loan delinquencies fell from 2.04 percent to 1.94 percent, and marine loan delinquencies fell from 2.21 percent to 1.63 percent. Mobile home delinquencies fell from 3.74 percent to 3.63 percent, and personal loan delinquencies fell from 3.74 percent to 3.63 percent. In addition, property improvement loan delinquencies fell from 1.66 percent to 1.63 percent, and RV loan delinquencies fell from 1.64 percent to 1.44 percent.
Delinquencies remained unchanged in one category--indirect loan delinquencies remained at 3.15 percent. The only category to see an increase in delinquencies was home equity loans.
ABA also tracked three open-end loan categories. Delinquencies decreased in two of these categories and increased in one. Home equity lines of credit represented one category that saw a drop in delinquencies, and bank card delinquencies fell from 4.77 percent to 4.39 percent in the fourth quarter. An increase in delinquencies was seen in non-card revolving loans, which jumped from 1.4 percent to 1.46 percent from one quarter to the next.
Chessen said that while most consumers appear to be handling their finances well, the level of consumer credit delinquencies is still heavily tied to job creation.
""People are actively reducing their level of debt relative to their income and are rebuilding their savings,"" he said. ""But it's still a very stressful time for many families and this won't disappear until more people have jobs. This will keep delinquencies elevated for the next several quarters.""
