Delinquencies, or payments that are 30 days or more overdue, on home-related loans are declining toward historical norms, a sign of continued progress for the housing market. Both open- and closed-end home-related loans, according to a recent report by the American Bankers Association (ABA), showed an overall decrease.
“The steady decline in home-related delinquencies has been a bright spot as they grind their way back to pre-recession levels,” says James Chessen, chief economist of the ABA. “We expect this trend to continue as the housing market keeps gaining strength.”
Delinquencies on closed-end property improvement loans and open-end home equity lines of credit (HELOCs) dropped to 0.87 percent and 1.31 percent, respectively. Closed-end mobile home and home equity loan delinquencies rose slightly, to 3.59 percent and 2.91 percent, respectively. A closed-end loan is for a fixed amount of money with a fixed repayment period and regularly scheduled payments. An open-end loan is for a fixed amount of available credit but a balance that fluctuates depending on usage.
“A good economy and lower delinquency rates go hand-in-hand, and the Fed is betting on a stronger economy in 2016,” adds Chessen. “If the economy remains solid and jobs continue to grow, we would expect delinquency levels to continue hovering near these historic lows. As always, disciplined financial management by consumers is an essential ingredient for lower delinquencies. Now is a great time for consumers to reflect on their holiday expenditures and resolve to reduce any excess debt in the New Year.”
Delinquent borrowers should speak with creditors as soon as possible to assess their options.
Published with permission from RISMedia.