Banks face rising delinquency rates

Rising U.S. unemployment is pushing delinquency rates on credit card and home equity loans near or over record levels, a Standard & Poor’s economist said.

Chief economist David Wyss told Forbes that high delinquency rates are historically tied to high jobless rates.

With the unemployment rate at a 26-year high at 9.5 percent, the American Bankers Association reported delinquency rates on bank-issued credit cards reached 4.75 percent in the first quarter, up from 4.52 percent in the final quarter of 2008.

The record delinquency rate, which counts accounts without a payment for at least 30 days, is 4.81 percent, set in 2005.

Home equity loans with more than 30 days without a payment reached 3.52 percent in the first quarter, while delinquency rates on lines of credit reached 1.89 percent, both records.

For some the incentive to pay off home equity loans has evaporated, Wyss said.

There’s no incentive to pay off the second mortgage because there’s nothing the lender can do, and the creditor can’t afford to foreclose because the first lien holder gets all the money, Wyss said.