3 March 2009

Mortgage Delinquencies Jump 50 Percent

NEW YORK -- More U.S. consumers are filing for personal bankruptcy or relying on credit cards as the recession deepens and unemployment rises, a top credit bureau executive told Reuters on Thursday.

Dann Adams, president of U.S. Information Systems for Equifax Inc, reported a 37 percent rise in Chapter 7 bankruptcy filings. Under Chapter 7, assets are liquidated for those unable to pay their debts.

Also, Equifax reported a 50 percent increase in the number of homeowners who fell at least a month behind on mortgage payments in January, compared with last year.

Mortgage delinquencies foreshadow a rise in future foreclosures, short sales and home price declines as banks repossess homes and sell them at deep discounts.

Over the next six to eight months, the mortgage delinquency rate will reveal whether the government's plans to put a floor under housing prices is succeeding, Adams said.

"If the government can stabilize that number, it will mean at least things are not getting worse," he said.

According to Equifax, the number of consumers who missed payments on bank-issued cards rose 29.5 percent, with 4.17 of cardholders at least 60 days late on payments in January.

Those 60 days behind on auto loans from carmakers rose 18.8 percent, with 1.9 percent 60 days behind in January.

In the latest data from the U.S. Commerce Department on Thursday, new U.S. orders for long-lasting manufactured goods fell for a sixth consecutive month to a six-year low in January, indicating fewer workers are needed in the sector.

Also, the number of U.S. workers remaining on the jobless benefits roll after drawing an initial week of assistance jumped to a record high of 5.11 million in mid-February, the Labor Department said Thursday.

In response to the worsening credit data, lenders are ramping up how frequently they monitor borrowers' credit profiles, said Adams, whose clients include banks and other lenders trying to avoid more bad debt on their balance sheets.

"Those who were monitoring once a month have moved to weekly. Those who monitored weekly are moving to daily," Adams said.

Lenders are also spending more money on collections and less on getting new customers, Adams said, and are culling inactive cards and tightening lending standards on inactive cards.

The number of open bank-issued credit cards fell by 30 million since the July 2008 peak to 408 million in January. Credit limits fell to $3.3 trillion in January from a July 2008 peak of $3.59 trillion.

"It's all hands on deck around collections and loss mitigation," he said. "Everything's moved from acquisition to managing the portfolio."

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