Home Equity Loan Delinquencies Jump 3rd Quarter

[Jan 17, 2010.]

 

American Bankers Association

The American Bankers Association (ABA) is the largest trade association for the banking industry. The member organization is based in Washington DC and works with legislators and regulators to serve its registry. The ABA collects information from banks of all sizes and charters across the country and compiles reports on the state of the banking industry in the economy. As you might imagine, the ABA has been instrumental in dealing with the near collapse of the banking sector in 2008.

What ABA Says about Home Equity Loans

In its most recent report dealing with home loans, the ABA states that delinquencies on home equity loans has jumped 29 basis points (a basis point is one-hundredth of one percent) to 4.3% of all accounts, breaking a previous record increase. Home equity line of credit delinquencies also increased. They were up 20 basis points to 2.12% of all accounts. Chief Economist for the ABA James Chessen commented, "Delinquencies may be near their peak as job losses have slowed." The stress in the housing market due to home owners losing value is also a contributing factor.

Contrasting Home Equity Loans with Other Consumer Loans

While delinquencies on home equity loans and home equity lines of credit are increasing, the opposite is true for consumer loans. In the third quarter of 2009, consumer loans like auto loans and recreational vehicle loans, had fewer delinquencies. Some analysts believe that fewer delinquencies on consumer loans can be credited in part to banks writing off uncollectable debts. Consumers are also more cautious with credit and have made headway paying down debts.

Interest Rates On Home Equity Loans

Approval guidelines on home equity loans have tightened. You may find that the loan to value ratios are much lower than in past years. The available loan amounts have been reduced in many cases. Home loan lenders have increased their profit margins on new home equity loan originations. Despite these facts, home equity loans continue to be a great benefit for consumers looking to make home improvements or consolidate high interest debts. Home equity loans are among the least expensive type of financing in this new economy.

Speak to a home loan specialist to see if you are eligible for a fast loan approval. Act now while mortgage rates are still low.

 

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.