Americans have been working hard to keep their debts paid on time - bringing down the rate of consumer loan delinquencies for the third straight quarter, according to a report released on Wednesday by the American Bankers Association (ABA).

In the eight closed-end loan categories tracked by the ABA’s Consumer Credit Delinquency Bulletin, the rate of delinquencies fell to 2.89% of all accounts in the first quarter of 2010 from 3.19% in the previous quarter. The ABA defines as a loan where the payment is 30 or more days overdue.

Delinquencies fell in five of the eight installment loan categories for the first quarter: auto loans, both direct (loans obtained directly through a lender such as a bank) and indirect (loans arranged through the auto dealer); home equity loans; personal loans; and property improvement loans. The three loan types that increased in delinquencies were recreational vehicle loans, marine loans, and mobile home loans.

ABA Chief Economist James Chessen said the improvements reflect concerted efforts by consumers to shore up their finances. "It's clear that consumer balance sheets are improving. People are borrowing less, saving more and building wealth. These are all positive signs, " he said.

Chessen added that across-the-board improvements in housing-related loan delinquencies indicate stability is returning to the housing market. "This is the first inkling that stability is taking hold in the housing market, but the pace of recovery will still be long and drawn out," Chessen noted.

The ABA survey also tracks three types of open-end loans: bank credit cards, home-equity lines-of-credit, and non-card revolving lines-of-credit. The rate of bank credit card delinquencies fell to 3.88% - its lowest level in eight years and below the fifteen-year average of 3.93%. The rate of delinquencies for home-equity lines-of-credit fell to 1.81%, but delinquencies for non-card revolving lines-of-credit rose to 1.63% of accounts.

"The overall risk in banks' consumer loan portfolios is improving and will continue to do so," Chessen said. "Banks are putting losses behind them and following a prudent approach to new loans because the on-again, off-again economy is keeping risk high. Regulators are also demanding that banks remain cautious. With job growth creeping back slowly and personal incomes rising a bit, I'm hopeful that improvements in consumer delinquencies will continue," he added.


Source:
American Bankers Association