It’s not just sub-prime first mortgage borrowers who are falling behind in their payments. Rising delinquency rates are hitting home equity lines of credit, car loans and credit cards. These borrowers have good credit and were thought to be the bulwark against the sub-prime borrower risk. In the parlance of the day, we are in a credit bubble.
About 5.7 percent of home equity lines of credit were late or in default at the end of 2007, up from 4.5 percent the prior year, according to Moody’s and Equifax.
About 7.1 percent of auto loans were delinquent, up from 6.1 percent. Personal bankruptcy filings are also on the rise.
On February 11, 2008, Fitch Ratings, a debt rating company, reported credit card companies wrote off 5.4 percent of their prime card balances in January, up from 4.3 percent last year.
At the end of September, almost 4 percent of prime mortgages were past due or in foreclosure, according to the Mortgage Bankers Association. This is the highest rate since 1998, when the company starting tracking.
“This collapse in housing value is sucking in all borrowers,” said Mark Zandi, chief economist at Moody’s Economy.com. That sucks.
Sources and Further Reading:
Mortgage Crisis Spreads Past Subprime Loans (The New York Times)
Mortgage Crisis Spreads Past Subprime loans (cnbc)
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