Interest Rate Roundup

Monday, December 04, 2006

Fed data: Delinquencies on the rise

Every quarter, the Federal Reserve releases data on loan delinquencies (defined as loans that are at least 30 days past due) and charge-offs. Q3 figures were just released today. Surprise, surprise: Late payments on real estate loans are on the rise.

The delinquency rate for all RE loans jumped to 1.47% in Q3 from 1.38% in Q2. That's the highest since Q2 2004. The residential RE delinquency rate jumped to 1.72%, the highest since Q4 2003, while commercial RE delinquencies were only 1.10%, the highest since Q1 2005.

It's important to note that these deliquency rates are VERY low historically. But the trend is clear -- toward higher DQ rates. All the easy money/Frankenstein Financing handed out during the housing bubble is coming back to bite lenders. The only question is, "How severe will the fallout be?"

Delinquency rates for most other loan categories (agricultural, commercial & industrial, etc.) remain low, though credit card DQs are picking up. Charge-offs remain low, but they lag DQs by a few months (you have to miss a payment first, then the bank tries to get you caught back up, THEN they charge off the loan as uncollectable)


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