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HEL Delinquency Down, HELOC Lates Up

Mortgage News

Fewer borrowers on closed-end home-equity loans missed their payments during the latest quarter. But delinquency on home-equity lines of credit took a turn for the worse.

Delinquency of at least 30 days on closed-end HELs finished the third quarter at 4.12 percent. The figure was seasonally adjusted.

The American Bankers Association, which reported the data, said that HEL late payments tumbled from 4.38 percent in the second quarter.

Past-due HEL payments also improved from the third-quarter 2010, when the delinquency rate was 4.05 percent.

“The housing market is still ill, but signs of a turning point are beginning to appear,” ABA Chief Economist James Chessen said in the report.

The news wasn’t so good, however, for open-end home loans.

The trade group said HELOC delinquency finished the latest period at 1.93 percent.

The HELOC rate was 1.91 percent three months earlier and 1.74 percent a year earlier.

But late payments on property improvement loans fared better, dropping 11 basis points from the second quarter to 0.96 percent. The rate was also better than 1.23 percent in the third-quarter 2010.

Among all 11 consumer categories tracked by ABA, seven had lower delinquency rates.

The composite delinquency rate fell to 2.59 percent from 2.88 percent and was 3.01 percent a year prior. The composite rate reflects eight categories.

“Household debt levels continue to fall and are getting easier to manage,” Chessen explained. “Subtle improvements in the economy such as lower gas prices and a better job market have reduced some of the stresses facing consumers.”

Chessen predicts a slow improvement in overall consumer delinquency.

“Improvement in delinquencies over the next year hinges on the housing market, which still poses an enormous challenge to continued economic growth,” the economist said. “Job creation and income growth are also a must if we hope to see delinquencies continue to fall.

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