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HEL Performance Defies Overall Bank Deterioration

Mortgage News

While the quarterly rate of past-due payments on consumer credit at financial institutions deteriorated, home-equity loan performance improved.

Delinquency of at least 30 days on consumer credit assets that are owned by banks landed at 1.56 percent as of the first quarter of this year.

The rate, which reflects performance on eight types of closed-end installment loan categories, worsened by 5 basis points from the prior period.

Historical data from the American Bankers Association, which reported the latest data on Thursday, indicate that the deterioration was more profound compared to the 1.38 percent rate in the same three-month period last year.

“Eight years into the economic recovery, it was inevitable that we’d start to see delinquencies edge up from their extremely low levels,” ABA Chief Economist James Chessen stated in the report. “Even in a strong economy with good job growth, there are always people living paycheck to paycheck.”

But Chessen noted that
most consumers have carefully managed their debt levels to ensure they can withstand those small setbacks.

Despite worsening overall consumer credit performance, the rate of late payments on HELs improved to 2.59 percent from 2.61 percent in the fourth-quarter 2016.
A far more substantial improvement was made versus the first-quarter 2016, when the rate was 2.74 percent.
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“As home prices have risen, home-related delinquencies have returned to normal levels,” Chessen explained. “Greater equity incentivizes people to remain current on their mortgage loans, and we expect this gradual improvement to continue.” 

The improvement, however, didn’t carry over to home-equity lines of credit, which saw the 30-day rate climb to 1.11 percent
from 1.06 percent in the final quarter of last year. HELOC delinquency was better, though, than 1.15 percent in the same quarter last year.

Also worsening was mobile-home delinquency, which shot up to 4.86 percent from 4.07 percent in the final-three months of 2016 and 3.41 percent in the first-three months of 2016.

At 0.98 percent, there was no change in delinquency on property improvement loans compared to three months earlier. But the rate worsened from 0.89 percent one year earlier.

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