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Consumer Loan Delinquencies Dip Third Quarter 2009

Consumer delinquencies in nearly all loan categories declined in the third quarter of 2009, according to a report released today by the American Bankers Association (ABA). This is the first time since 2007 that so many loan categories experienced a decline in delinquencies, which the ABA defines as a late payment that is 30 or more days overdue.

The ABA's composite ratio, which tracks eight closed-end installment loan categories, fell 12 basis points to 3.23% of all accounts, down from 3.35% of all acocunts in the previous quarter. Bank card delinquencies fell 24 basis points to 4.77% of all accounts.

ABA Chief Economist James Chessen said the news was positive, but the weak economy and job losses continue to weigh on consumers. "Delinquencies may be near their peak as job losses have slowed," he said. "Consumers are working hard to get their financial houses in order by spending less, saving more, and paying down debt. But there's still a bumpy road ahead with many people unemployed and family budgets stretched to their limits."

Chessen also attributed the lower delinquency rates to banks writing off bad loans. "Banks are putting losses behind them, setting the stage for expanded lending to consumers as the economy recovers," he said.

Auto loans continued to show improvement, delinquencies in direct auto loans (loans arranged directly through a bank) fell almost a half a point to 2.04% of all accounts. Delinquencies on indirect auto loans (loans arranged through the dealer) fell to 3.15% of all accounts from 3.26% in the previous quarter.

"It's always a good sign when delinquencies decline, but they're still relatively high," Chessen said. "Until the economy generates more jobs and the housing sector stabilizes, they're likely to stay that way."

Other categories of loans were: marine loan delinquencies, which fell from 2.28% to 2.21%; personal loan delinquencies, which fell from 3.90% to 3.74%; property improvement loan delinquencies, which fell from 1.79% to 1.66%; and RV loan delinquencies, which fell from 1.72% to 1.66%.

While all other major categories dropped, housing-related delinquencies continued to rise. Home-equity loan delinquencies jumped 29 basis points to 4.30% of all accounts and home-equity lines-of-credit rose 20 basis points to 2.12% of all accounts, both hitting a new record. Mobile home loan delinquencies edged up to 3.63% from 3.53% in the previous quarter.

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Thursday, 09 July 2020

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