More delinquencies also means more loss and write-off for the banks. The big question is what are the lenders breaking point. They already have government funds propping them up - but will that be enough? Probably not for some. So let's take a look at this Washington Post article titled Delinquencies On Home-Equity Loans, Credit Cards Hit Historic Levels -
Delinquencies on home-equity loans and credit card payments hit record highs in the first quarter of this year, according to data released today by the American Bankers Association.
Home-equity loans were one of the major culprits of the current crisis. To recap: Cheap credit caused a housing boom in the first part of this century. Skyrocketing home values led homeowners to take out home-equity loans -- essentially, treating their homes like ATMs -- to buy consumer products. Then, when home values started flattening then falling, it all collapsed, debt upon debt.
According to the American Bankers Association, delinquencies on home-equity loans climbed to 3.52 percent from 3.03 percent in the fourth quarter of 2008, with late payments on the loans jumping to a record 1.89 percent....
This is even worse news: It means people are living off their credit cards with 28 percent interest rates now that their home-equity loans have run out.
This is why smart people are skeptical that the U.S. is in a real recovery. Many believe there's more bad news to come until unemployment starts dropping and home prices stabilize.
Things are interconnected - if people are not working they can not pay their bills - including HELOCs. We wonder were the new historic highs will be. Close to 5%? Maybe more?