ATLANTA (8/27/12)--Credit unions will be happy to learn that delinquency rates in the nation's home and auto loans and credit cards saw double-digit declines from July 2011 to July 2012. But those who offer student loans should be alert to student loan delinquencies and write-offs, which increased significantly, says a new report.
According to Equifax's monthly National Consumer Credit Trends Report for July:
- Auto loan 60-day plus delinquency rates dropped 35%;
- Consumer finance 60-day plus delinquency rates declined 23%;
- Bank credit card 60-day plus delinquency rates decreased 21%;
- First mortgage severe derogatory rates--those primarily loans transitioning to real estate owned (REO) status--declined 17%;
- First mortgage 30-day plus delinquency rates fell 15%; and
- Home equity revolving 30-day plus delinquency rates slipped 7%.
However, write-offs for student loans rose more than 29% from June to July and 60-day delinquency rates for these loans increased more than 14% from July 2011 to 2012. During that 12 months, student loan balances rose $58.5 billion.
The number of student loans has risen nearly 24%, to 116 million loans in July from 89 million loans in July 2011.
At $9.3 billion, student loan write-offs year-to-date through July are 10% higher than the $8.4 billion a year ago. These loans' severe derogatory balances--the major component of write-offs--year-to-date through July totaled $7.3 billion or 14% higher than the $6.3 billion for the period a year ago.
"Student loans is one area of lending not affected by tighter underwriting standards since the start of the recession," said Equifax Chief Economist Amy Crews Cutts. "The investment in higher education pays off over a person's lifetime, while the tuition cost has to be paid up-front, leading to big demand for student loans.
"Unfortunately, the current job market has not been kind to new graduates and their student loans start to come due once they graduate--if they don't have a job by the time the first installment is due, they can find themselves in quite a jam," Crews Cutts said.
Equifax also noted new credit increased 13% to $348 billion in May 2012 from $305 billion in May 2011. Bank credit cards rose 21%--to $72.9 billion from $58.1 billion from May 2011. Consumers continued to improve their credit management through making higher monthly payments on card accounts and refinancing mortgages at lower rates, said Equifax. Growth in total credit is consistent with the overall slow-but-steady improvement in the economy, said Crews Cutts.
Credit unions' 60-day plus delinquencies for all loans were 1.44% of total loans in March, the latest data available, according to the Credit Union National Association's Credit Union Profile for First Quarter 2012. Net chargeoffs to average loans were 0.79%. Both figures are down from 2011, at 1.60% and 0.91%, respectively.