Late payments retreated on closed-end home-equity products. But the level of past-due payments on home-equity credit lines was worse and is expected to keep deteriorating.
Home-equity loans owned by banks had a 30-day delinquency rate of 4.00 percent during the first quarter.
HEL delinquency improved 8 basis points from the fourth quarter and was down 12 BPS compared to the first-quarter 2011.
But the news from the American Bankers Association wasn’t so good for home-equity lines of credit, which saw a 9-basis-point increase in the 30-day rate to 1.78 percent. Out of 11 consumer credit categories tracked by the ABA, the HELOC rate was the only one to worsen.
HELOC delinquency, however, slipped 2 BPS from a year earlier.
ABA Chief Economist James Chessen blamed the HELOC deterioration on an adjustment still underway in the housing sector.
“It will be many quarters before delinquencies on home equity loans get back to anything close to normal,” Chessen said in the report.
Delinquency on mobile home loans tumbled to 3.25 percent from the fourth quarter’s 3.76 percent and the year-prior level of 3.74 percent.
A 10-basis-point quarter-over-quarter decline was reported for property improvement loans, which landed at 0.83 percent. The 30-day rate was 1.02 percent in the same quarter last year.
Including all 11 consumer credit categories tracked by the ABA, delinquency was down 14 BPS from the final quarter of last year to 2.35 percent — the lowest rate since 2007. In the first quarter of last year, the 30-day composite rate was 2.71 percent.
“Improvement was all the more remarkable when you consider that gas prices rose 66 cents a gallon in the first quarter alone,” Chessen said. “That’s a significant amount of money that was diverted from other uses, including paying off debt. Gas prices have fallen 48 cents a gallon since the first quarter so that pressure has abated somewhat and freed up precious resources.”
The economist predicts that overall delinquency rates will continue to improve, though not as dramatically as during the last two quarters.