Friday, October 3, 2008

Late Payments on the Rise

Late payments are at a rate not seen in 16 years - from the 1992 recession. That is prior to the large fall in jobs that we have seen in our previous post. This would indicate that the numbers regarding late payments will continue to rise - as will the sales across the board continue to slump. This article from Reuters titled Late US consumer loan payments hit 16 year high - ABA describes what is occurring. Lets take a look -

Late payments on U.S. consumer loans rose in the second quarter to their highest level in 16 years as more homeowners fell behind on their home equity loan payments amid the worsening housing slump, a banking industry group said on Friday.

The American Bankers Association said its quarterly composite index, which tracks late payments of 30 days or more for several types of loans, rose to 2.68 percent during the April-June period. It was 2.62 percent in the first quarter.

The composite index was pushed higher by borrowers falling behind on fixed home equity loans, with late payments rising to 2.56 percent in the second quarter from 2.34 percent the previous quarter.

However, late payments on other consumer loans for autos, property improvement, boats, recreational vehicles, and mobile homes dropped in the second quarter from the first, the group said.

"The collision of falling home values, declining stock prices and rising every day expenses has severely dented the financial security of many people," American Bankers Association Chief Economist James Chessen said in a statement.

These numbers do not include credit card payments or open-ended HELOC lines. But with numbers like these, and the addition of a credit crunch, we will be heading into a very dismal holiday season.

No comments: