Junior Lien Performance Strong at Banks

The composite rate for 30-day delinquency on closed-end installment loans was 1.57 percent at banks in the second quarter.

Delinquency was substantially better than the average 2.32 percent rate for the past 15 years and the lowest level on record.

The performance metrics were discussed in the American Bankers Association’s Consumer Credit Delinquency Bulletin.

The composite ratio, which reflects performance on eight consumer categories, came down 6 basis from the three months ended March 31.

A bigger improvement was made by banks from the second-quarter 2013, when the composite ratio was 1.76 percent.

ABA Chief Economist James Chessen explained in the report that healthy job growth, increasing income, low interest rates and declining debt levels have enhanced borrower ability to repay debt.

Chessen predicts delinquency will remain close to the latest level in the months ahead.

Thirty-day delinquency on home-equity loans was 3.36 percent, falling from 3.57 percent in the first quarter and 3.83 percent in the second-quarter 2013.

Home-equity line-of-credit delinquency was 1.50 percent as of June 30, retreating 7 basis points from three months earlier and sinking 40 BPS from a year earlier.

The improvement in HELOC performance was a positive sign given that many lines will convert to fully amortizing over the next few years, Chessen said.

A 3-basis-point decline from the first quarter left delinquency on property improvement loans at 0.97 percent. The rate was worse, however, than 0.80 percent in the second-quarter 2013.

“Home-related delinquencies are moving in the right direction, mirroring the slow recovery in housing,” Chessen said. “Rising home prices in many communities have helped shore up the value of many families’ most important investment, helping to rebuild wealth and ease pressure on consumers.”

But mobile-home delinquency worsened to 3.56 percent in the second quarter from 3.37 percent in the prior period.