HEL Delinquency Deteriorates

Delinquency of at least 30 days on consumer installment loans owned by banks was at a rate of 1.63 percent in the first quarter.

Thirty-day delinquency on the loans worsened by 4 basis points compared to the final quarter of last year.

The American Bankers Association reported the performance data Thursday. The rate was based on a composite ratio reflecting eight closed-end installment loan categories.

ABA explained that the up tick followed two consecutive quarters of record low delinquency.

Focusing on just HELs, the 30-day rate was 3.57 percent, increasing from 3.48 percent in the fourth-quarter 2013.

HEL delinquency was better, however, than in the first-quarter 2013, when the rate was 3.72 percent.

On home-equity lines of credit, the past-due rate improved by 10 BPS to 1.57 percent. A year earlier, HELOC delinquency stood at 1.91 percent.

“Home-equity line delinquencies have fallen back to what they were five years ago,” ABA Chief Economist James Chessen said in the report. “This is a positive trend in light of the number of home-equity lines that will move into the fully amortizing period over the next several years, raising the monthly payment obligations for some borrowers.”

Interagency guidance issued earlier this month by bank regulators warned financial institutions that they need to prepare for a period when HELOC borrowers will transition from being able to take draws to having to instead make principal repayment — some at higher rates and payments.

Loans for property improvement saw the 30-day rate retreat to 1.00 percent from 1.07 percent as of the end of last year. This category has deteriorated, however, 26 BPS compared to March 31, 2013.