Non-Mortgage Delinquencies Rise

Non-mortgage delinquencies conveyed a more negative picture of underlying consumer finances than did mortgage delinquencies at the end of 2002. The American Bankers Association (ABA) recently released its index of consumer loan delinquencies and found that most categories of loans experienced declining payment performance, relative to one year earlier. The percent of credit card accounts 30 days or more past due at the end of the fourth quarter 2002 was 4.07%, setting a new record as it rose 19 basis points from one year earlier. James Chessen, chief economist for the ABA, told the American Banker, "You always have to be concerned when setting a new record. Anyone looking at that number can't help being concerned about consumers' ability to repay this year."

Perhaps more disturbing, the percent of open-end home equity loans past due also rose 26 basis points from a year earlier to reach 1.64%. This marks the highest home equity delinquency rate since 1993. The ABA's composite index of installment loans (including direct and indirect auto, personal, home improvement, RV, mobile home, marine and closed-end home equity loans) revealed that 2.16% of all such loans were delinquent 30 days or more at the end of 2002, still 8 basis points below the level a year earlier.

Chessen ticked off a number of factors which could be causing delinquencies to rise. Chief among them is the volume of newly unemployed workers. The Bureau of Labor Statistics reports that there have been 1.8 million manufacturing and 3.5 million corporate layoffs since 2001, including 243,000 net jobs lost in the fourth quarter of 2002. Chessen told the American Banker, "You cannot have continued job losses and no new jobs created and expect that people are going to easily manage their financial obligations. Some portion of the population is struggling."

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