Wednesday, July 02, 2008

Report: HELOC Delinquencies Rising Rapidly

by Bill McBride on 7/02/2008 11:05:00 AM

From Bloomberg: Overdue Home-Equity Credit Lines Rise Most Since 1987, ABA Says

Home-equity lines of credit at least 30 days past due rose 14 basis points to 1.1 percent of accounts for the quarter, the Washington-based group said today in a statement. Delinquent credit-card accounts increased 13 basis points to 4.51 percent, the highest level since 2006.

``People are looking for any source of funds to pay their daily expenses,'' Carol Kaplan, spokeswoman for the bankers' group, said yesterday in an interview. ``It's a sign of the overall condition of the economy that people are having trouble making their payments.''
The headline is referring to the rate of increase in the delinquency rate, and this was the biggest quarterly increase the ABA has ever measured (starting in 1987).

The HELOC delinquency rate is the highest in 11 years. The loss severity for HELOCs is very high - frequently lenders take a 100% loss when a borrower defaults on a HELOC because they are behind other liens on the property.