The housing market after half a decade of boom came down with a thump last year. The increasing delinquencies on mortgage loans, especially subprime mortgage loans have been at epidemic proportions. Unfortunately, the home equity line of credit loans has not escaped this legacy of defaulting home loan mortgages. The latest news shows that late payments on home equity loans have increased to a one and a half year high in the first quarter of this year.
However, what is surprising to me is that late payments on credit cards fell. It could very well be that some people are using their home equity line to pay for credit card bills but at the same time forget to pay their home equity loan; if this is true than its like robbing Paul to pay Peter. I am certainly perplexed with these statistics; the decline in late payments for credit cards doesnt make sense.
The financial distress for many people has not decreased but increased. The worst of the housing market has not been seen, as the market hasnt hit its bottom. The mortgage companies going out of business and filing for bankruptcies, excess mortgage brokers and real estate agents adding to the unemployment roster, the previous homeowners of now foreclosed properties attempting to get out of a mountain of debt; these remnants are strewn across the American landscape.
The American Bankers Association (ABA) stated that between January and March 2007 payments on home equity loans rose to 2.15 percent, an increase of 0.23 percent since the fourth quarter of 2006. The ABA quarterly survey of consumer loans reflected delinquency rates based on a composite of several types of consumer loans such as boats, autos, home improvements, some home equity line of credit loans increased to 2.42 percent in the first three months of this year. This was the highest delinquency rate since second quarter of 2001, up 0.19 percent from the fourth quarter of last year.
The main instigator for the increase in the delinquency rate as shown by the composite survey was the rise of home equity loan delinquencies. Bill or loan payments are regarded as delinquent if they are past due by 30 or more days. The ABA survey results are based on data provided by more than 300 banks nationwide.
Nationwide the surprisingly brighter news about the decline of late payments on credit card bills was greeted by financial experts with bafflement and amazement. It is truly remarkable since the economy is in the doldrums and GDP has grown unremarkably at 0.7 percent the first quarter this year. Credit card debt, due to the late payments on credit card bills decreased the first three months of the year to 4.41 percent, a decrease of 0.15 percent from the fourth quarter of last year. Somehow, the credit card decline in late payments seems to be an anomaly, only the next quarter survey results will tell.