Equifax: Tighter Underwriting Guidelines Have Improved Loan Performance
Equifax's latest National Credit Trends Report shows that total consumer debt now stands at $11.2 trillion, nearly equivalent to the $11.1 trillion posted pre-recession in 2006 according to the most recent Equifax National Credit Trends Report. Consumer debt outstanding peaked in October 2008 at $12.4 trillion. In addition the report reveals: ►$436 billion of total new credit (which includes auto loans, bank credit cards, consumer finance loans, home equity lines of credit [HELOC], retail credit cards and student loans) was originated between January-July 2011. This represents the highest total for that period in three years, but is still well below the $805 billion in new credit originated between January - July 2006. ►While total outstanding debt continues to decrease, consumers are beginning to utilize bank credit cards and retail credit cards more, with both sectors seeing balance increases over the past four months (June-September 2011), following four previous months of balance decline (February-May 2011). ►For all tracked sectors, loans originated between 2005-2007 present the biggest challenge in terms of ongoing delinquencies as they represent 31 percent of total balances, but 65 percent of all past due (30-plus days) balances. This is particularly true for first mortgage and home equity loans originated during this timeframe as 74 percent of first mortgage loan delinquencies and 80 percent of home equity revolving loan delinquencies were originated during this time. "The impact of 2005-2007 vintage loans continues to be felt across multiple lending sectors," said Michael Koukounas, SVP of special client services for Equifax. "More than two-thirds of delinquent loans can be sourced to those originated during that time. In contrast, loans originated after 2008 are performing substantially better due to the tighter underwriting guidelines in place since then." Home equity loan balances continued a 12-month decline, with September 2011 home equity installment loan balances more than 13 percent less than September 2010 levels; and September 2011 home equity revolving loan balances 6.6 percent lower than September 2010 levels. Total new consumer finance loan amounts have remained consistent over the past three years, with $5.2 million originated in July 2011 (compared to $5.1 million in July 2010; and $5.2 million in July 2009).