Smart Borrower Blog

Consumers Push Mortgage, Credit Card Delinquencies Lower

Jul 7th, 2016 @ 8:21 PM by Amber Nelson

U.S. consumers continued to manage their debts better in the first quarter, according to the latest report from the American Bankers Association, with delinquencies falling in seven of the 11 tracked loan categories.

“More people have jobs, wages are higher, home values have increased and consumers didn’t overextend themselves during the holiday season,” said James Chessen, ABA’s chief economist. “Even with a mild slowdown in the economy in the first quarter, consumers have shown a remarkable ability to ensure their debt levels are manageable.”

That was evidenced by a decrease in the ABA composite ratio, a measure of delinquencies (loans that are late by 30 days or more) in 8 closed-end loan classifications. It declined to 1.38 percent of all loan accounts, down from 1.41 percent during the first quarter. By historical standards the delinquency rate is very low, as the composite ratio has averaged 2.23 percent over the past 15 years.

The ABA also tracks three open-end loan categories. Of the 11 total tracked categories, delinquencies fell in seven: indirect auto loans, RV loans, marine loans, property improvement loans, bank cards, home equity lines of credit and non-card revolving loans. The two loan types that saw an increase in delinquencies were direct auto loans and mobile home loans. Personal loan delinquency rates were unchanged from the previous quarter.

The improvement in two of three mortgage loan categories was significant as it showed that homeowners have made their loans a top priority. “As the housing market continues its slow and steady recovery, consumers have more valuable equity at stake, which makes their loan payments even more of a top priority,” said Chessen. “Growing equity also makes new home equity loans a viable option for qualified home owners. The market for home equity loans and lines will likely continue to grow as a larger pool of qualified borrowers looks to take advantage of low rates to make property improvements or pay off higher-interest debt.”

And the ABA believes that the U.S. economy is strong enough to keep delinquencies from rising much this year. “With household wealth near an all-time high and economic fundamentals holding steady, delinquencies are likely to remain near these historic lows,” Chessen said.

About Amber Nelson
Amber Nelson is a seasoned mortgage industry writer and a regular contributor to and

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