Home mortgages at least 30 days late reached another record of 7.91% in November (in total dollars) – up from 7.76% in October and 7.65% the previous month, according to Equifax Inc.'s monthly Credit Trend Report. This record rate is a significant increase over the 5.83% rate in November 2008 and the 3.93% rate in November 2007.
In addition, home equity lines of credit (HELOCs) available to consumers are now an estimated $68 billion lower, and the number of accounts is an estimated 855,000 lower than the September 2008 peak of approximately 14.5 million accounts. This represents an improvement from October, when outstandings were $77 billion lower and accounts were lower by approximately 934,000.
Delinquency rates have crept up from 3.39% in October to 3.43% in November. These rates far exceed the 2.95% rate in November 2008 and the 1.92% rate in November 2007, Equifax notes.
‘The story of 2009 continues to be one of consumer retrenchment and credit tightness as people strive to pay down debt or are forced to abandon it, and lenders more aggressively manage risk in their portfolios,’ says Dann Adams, president of Equifax's U.S. Consumer Information Solutions.
U.S. consumers have reduced their debt by more than 5%, or $575 billion, from a year ago. First-mortgage debt dropped 5.4%, credit cards by 7.3% and auto loans by 9.5%. The declines put overall consumer debt at September 2007 pre-recession levels of about $11 trillion.
With U.S. home prices declining, originations for HELOCs are also declining. In September (the most recent month for which data is available), originations were 75,600 – 36% below the September 2008 total of 117,800, Equifax says.
Year-to-date 2009 new HELOCs opened – 761,000 – were 47% below 2008 year-to-date totals of 1.5 million. This continues a trend from 2008, when total originations were 1.7 million lines – 41% below the 2.9 million total for 2007.
Furthermore, HELOCs have primarily been issued to lower-risk consumers. Eighty-one percent of the consumers who received HELOCs in September were considered low-risk (i.e., Equifax risk scores of 740 and above) – an increase from 66% in September 2007. In conjunction with declining home prices and home equity, average HELOCs are 25% lower over the past two years, declining from approximately $105,000 to $79,000 today.
‘The contraction in home equity lines is a reflection of the credit crunch both consumers and small businesses are facing,’ Adams adds. ‘Restrictions in this traditional source of financing make finding credit harder than ever.’
Regionally, home equity line originations have diminished in states where home-price values have been the most volatile, notably California and Florida. California comprised almost 20% HELOC originations two years ago, with nearly 38,000 originations in September 2007, but dropped to second with about 7%, or 5,182 originations, in September of this year. Florida, once the second top state by originations, has dropped to ninth.
Data for the Credit Trends Monitor Report is sourced from Equifax's nearly 200 million files of U.S. consumers using credit.