Job Losses Drive Consumer Delinquencies to Record Highs

The American Bankers Association says home equity credit delinquencies have hit new highs.


The American Bankers Association is blaming the eroding labor market for a rise in consumer loan delinquencies, which have hit record high rates.

From the ABA:

The trade group says that more than two million jobs were lost in the first quarter of 2009, bringing the job-loss tally to more than 6 million since the onset of the recession. As layoffs mount, more Americans become unable to make loan payments. The delinquent balances on accounts included in the ABA's composite of eight different installment loan categories increased to 3.35 percent in the first three months of 2009, up from 3.16 percent in the last quarter of 2008, according to the ABA's most-recent Consumer Credit Delinquency Bulletin, released Tuesday.

“The number one driver of delinquencies is job loss,” James Chessen, the ABA's chief economist, said in a statement. “When people lose their jobs, they can’t pay their bills. Delinquencies won’t improve until companies start hiring again and we see a significant economic turnaround.”

At the same time, delinquencies in home equity credit have hit record highs. Home equity loan delinquencies rose to 3.52 percent, an increase of nearly half a percentage point from the previous quarter. Delinquencies on home equity lines of credit, meanwhile, jumped 43 basis points to 1.89 percent.

“Even if home prices stop falling later this year, unemployment will keep home equity delinquencies high for some time,” Chessen added.

The first quarter composite ratio is made up of the following closed-end loans. All figures are seasonally adjusted based upon the number of accounts:

Home equity loan delinquencies increased from 3.03 percent to 3.52 percent.

Property improvement loan delinquencies decreased from 1.75 percent to 1.46 percent.

Indirect auto loan delinquencies decreased from 3.53 percent to 3.42 percent.

Direct auto loan delinquencies increased from 2.03 percent to 3.01 percent.

Marine loan delinquencies decreased from 2.35 percent to 2.04 percent.

RV loan delinquencies increased from 1.38 percent to 1.52 percent.

Mobile home loan delinquencies increased from 2.96 percent to 3.70 percent.

Personal loan delinquencies increased from 2.88 percent to 3.47 percent.