Credit Crunch

The Comming credit crunch

Despite the steadily expanding U.S. economy, a perfect storm of rising mortgage rates, disappearing health-insurance coverage, stagnant wages and relentless college-tuition increases is gathering on the financial horizon for many Americans, threatening a flood of debt and bankruptcies. The warning signs are hard to miss:

The amount of consumer credit outstanding, led by brisk growth in credit card use, more than doubled in the first six months of the year, according to the Federal Reserve. Over the past two years, consumers increased their non-mortgage debt by 12.5 percent, reaching an average of $11,669 early this year, says Experian Consumer Direct, a company that compiles credit reports and scores. Meanwhile, the average number of late payments rose 19 percent, indicating increasing difficulty managing the greater debt load.

Mortgage foreclosures are on the upswing from historic lows, says Bob Visini, a spokesperson for First American LoanPerformance, a mortgage data company in San Francisco. There also is a significant increase in late mortgage payments among sub-prime borrowers, generally those with credit scores below 680 on a scale of 300 to 850. Nationwide, just over 10 percent of sub-prime borrowers are at least 30 days late on their mortgage payments."