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HEL Delinquency Improves, HELOCs Deteriorate

HEL 30-day delinquency down 31 BPS in Q1

July 9, 2013

By Mortgage Daily staff

Like overall consumer credit, closed-end home-equity mortgages performed better in June. But the share of late payments on open-end mortgages rose.

Past-due payments on closed-end consumer installment loans were lower last month, according to the Consumer Credit Delinquency Bulletin from the American Bankers Association.

The composite ratio, which tracks delinquencies in eight categories, fell 29 basis points from the fourth quarter to 1.70 percent in the first quarter.

It was the lowest level of consumer delinquency since December 2004

"Sharply lower delinquency levels reflect improving consumer balance sheets, steady job creation and a continuing increase in household wealth," according to ABA Chief Economist James Chessen. "Many consumers have learned the hard lessons of recession, and have redoubled their efforts to keep debt at manageable levels."

Chessen also cited consumer confidence.

Delinquency of at least 30 days on home-equity loans was 3.72 percent as of March 31, according to ABA.

The rate fell from the end of 2012, when it was 4.03 percent. HELs had a past-due rate of 4.00 percent as of the same date last year.

At 0.74 percent, property improvement loan delinquency was lower than 0.83 percent three months earlier.

"Positive trends in home-related delinquencies reflect a stronger economy and rebounding home prices," Chessen stated in the report. "While this improvement is encouraging, it will take a long time for delinquencies to work their way through the system and return to more normal levels."

But deterioration was noted in the performance of home-equity lines of credit.

HELOC delinquency was 1.91 percent as of the first quarter, up from 1.85 percent as of Dec. 31, 2012. In the year-earlier period.

Performances on HELOCs has also worsened from March 31, 2012, when the rate was just 1.78 percent.

Chessen pointed to HELOC payment shock that has occurred as lines are converted to fully amortizing from interest only.

Delinquency on mobile home loans surged to 3.92 percent from 3.53 percent at the end of 2012.

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