Delinquencies On Home-Equity Credit Lines Rising Fast
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If you didn't think the economy was bad yet, consumers fell behind on home equity loans at the fastest pace in the last 20 years during the first quarter of '08, according to the American Bankers Association.
"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 rise in delinquent home-equity accounts was the biggest since the ABA began collecting data in 1987. Delinquencies often don't peak until late in an economic slowdown.
Wilbur Ross told Bloomberg TV yesterday that "the average consumer is tapped out and burned." He also noted that the consumer used their house as an ATM machine, by pulling cash out of it as home values rose.
Mobile-home delinquencies jumped 30 basis points to 3.22% in the quarter, the ABA said.
American Express Co. (NYSE: AXP) CEO Kenneth Chenault said last week that credit indicators including late payments have worsened beyond the company's expectations in June.
To me, with this kind of data, I still continue to think the economy will get worse before it gets better. People are going to be unable to use their house as a piggybank and, therefore, less consumer spending, hurts everyone. I hope I am wrong, but I have been saying this since Washington Mutual (NYSE: WM) was trading in the $40s.
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