As the unemployment rate begins to slowly fall, more Americans are better able to keep up with their bills. Consequently, the number of severely delinquent loans is beginning to decline. But some types of loans are faring better than others.
A recent report by from the Federal Reserve Bank of New York shows that severe delinquency continues to rise for home equity loans, while delinquency for other types of loans is slowly declining:
A few notes here. First, this is through the first quarter. So far, the second quarter has been a little bit ugly, so some of these categories could tick up a bit this summer if the economy continues to stagger.
But through March, home equity loans appear to be the outlier on the chart. Every other loan type has declined from its recessionary high. All have also saw their severe delinquency rates tick down in the first quarter. Meanwhile, home equity severe delinquency rates hit a new high in the first quarter.
For now, however, home equity loans have the lowest delinquency rate among all products. But if these trends continue, that will quickly change. Home equity delinquency rates may soon surpass those of auto loans.
Even as the economy gradually improves home equity loan performance is worsening. There's little doubt that they'll be plaguing bank balance sheets for years to come.