Bills are piling up as economy slows

Reports indicate consumers getting behind on payments

March 16, 2001|By BLOOMBERG NEWS

NEW YORK - Consumers are apparently having more trouble managing their debt as the economy softens, two reports indicated yesterday.

Mortgage delinquencies grew in last year's fourth quarter to the highest level since 1992 as the economy slowed and homeowners were strapped for cash, a Mortgage Bankers Association of America survey found.

A second report by the American Bankers Association found that more people fell at least 30 days behind on their credit-card payments at year-end. About 3.34 percent of bills were overdue, up from 3.21 percent in the third quarter and 3.22 percent at year-end 1999.

The ABA, which surveys 700 to 800 banks quarterly, said 4.25 percent of total dollars owed were at least 30 days late, up from 3.93 percent in the third quarter and down from 4.28 percent at year-end 1999.

Delinquencies on mortgage loans, or loan payments missing for at least 30 days, rose to 4.54 percent, a 0.82 percentage point rise over the past three quarters. The rate is the highest since it hit 4.6 percent in the third quarter of 1992 at the end of the last U.S. recession. The data cover more than 30 million loans from about 140 lenders.

"The increase in the delinquency rate is significant" and was caused by the economic slowdown last year, said Douglas Duncan, chief economist at Mortgage Bankers Association.

"Rising energy prices also cut into homeowners' disposable income and ability to pay," Duncan said.

The increase in delinquencies might stall the surge in home prices seen in recent years, analysts say. It may also keep mortgage rates from slipping too much more, as lenders become more careful to whom they lend if missing loan payments mount.

The economy grew 1.1 percent in the fourth quarter at the slowest pace in 5 1/2 years as inventory investment slowed and consumer spending cooled.

Homeowners had a record-low 54 percent equity stake in their property in the fourth quarter as they borrowed more and banks, confident in consumers' ability to repay, extended credit, Federal Reserve data show.

A government index measuring the increase in home prices rose more than eightfold in the 1990s.

The North Central region saw the largest increase as the delinquency rate rose 0.59 of a percentage point to 4.28 percent, followed by the Northeast, which saw delinquencies rise 0.56 percentage point to 4.51 percent. Delinquency rates were highest in the South at 5.52 percent, and the lowest in the West at 3.51 percent.

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