Defaults on home equity loans hit their lowest level in two years

[Aug 14, 2010.]

 

According to the American Bankers' Association (ABA), for the first time in two years home equity loan delinquencies are down. Home equity lines of credit and property improvement loan delinquencies are also down. Bank portfolios of these loans are improving as banks write off debt and underwrite more conservatively. Lenders wrote off over $11 billion in home equity loans and almost $20 billion in home equity lines of credit in 2009. Q1 2010 numbers are down slightly from Q4 2009, when they hit the highest level in the 26-year history of recording these numbers.

The Chief Economist for the ABA, James Chessen, said that the across-the-board improvements in housing-related loan delinquencies indicate stability is returning to the housing market. "This is the first inkling that stability is taking hold in the housing market, but the pace of recovery will still be long and drawn out," he said. For the present, bank regulators are encouraging a very conservative stance until the economy is clearly stronger.

Every quarter, the ABA surveys 300 banks nationwide to get an overview of consumer credit trends. The Consumer Credit Delinquency Bulletin looks at eight different types of closed-end consumer loans: auto, mobile home, RV, marine, second mortgages (home equity loans / home equity lines of credit), bank credit cards, non-card revolving accounts, and student loans. The bulletin provides a look at past-due loans as a percentage of loans outstanding and dollars outstanding.

In a recent news release, the ABA stated that for the third straight quarter consumer loan delinquencies are improving. Bank credit cards that are 30 days or more past due are at the lowest level since Q2 2002. Chessen believes that these improved delinquency numbers mean that consumers are making concerted efforts to upgrade their financial situation. He said, "People are borrowing less, saving more and building wealth. These are all positive signs."

The ABA advises that if you are having trouble paying your debt, you seek help sooner rather than later. Bankruptcy is a short term solution with long term consequences. Try talking to your creditors or contacting the Consumer Credit Counseling Services (800) 388-2227.

Shop for a new home equity loan today.

 

About Author:

Renee Morgan has been a loan officer for over eighteen years. She is also a freelance writer and guest expert for radio and TV.