More Problems for Banks Seen Looming on the Horizon

June 28, 2008 - The first cycle in the credit crisis may have past however it appears the crisis is far from over and another cycle may be looming and gaining momentum as the economy weakens and defaults spread into new categories of loans.  While mortgage loans have been the overriding theme of loan delinquencies in the initial phase of the cycle's crisis, the next phase seems to be expanding into areas concerning other forms of consumer debt.  As the downturn has filtered throughout the economy, many types of consumer debts are now being impacted.  Delinquent payments on home equity loans (also known as home equity lines of credit or HELOCs) are now reportedly at record highs as well as rapidly growing delinquency rates on auto loans, constructions loans and even business loans are now feeling the pinch.  Many categories of loans are reaching delinquency rates not seen in over a decade.  Regional banks may represent the types of local institutions which are most at risk in this next phase of the credit crisis as they tend to be a major source of loans for communities and businesses as well as being a strong player in extending personal consumer loans.  The concern is that these smaller, regional institutions will have fewer options if and when the need arises to raise funds as quickly as has the bigger institutions are able to do.   

In the previous six months, almost $7 billion in home-equity loan payments fell into default, reaching an overall delinquency rate of around 2 ¼ % and growing by 45%.  Not surprisingly, almost appearing in tandem, delinquency rates in almost every other consumer loan category also grew in the first quarter as well.  Now reaching the highest level since the early 1990's, auto loans have a delinquency rate of over 3%.  Businesses are also feeling the impact of the country's debt hangover as construction and development loans have topped 7% in their rate of delinquent payments at the end of the first quarter, hitting a level not seen in almost 15 years.  So while the meltdown in sub-prime mortgage-backed securities may have ignited the crisis at the inception, the developing problems within the broader economy, sparked by the escalating costs for fuel and other commodities, have expanded the crisis to the point now where it is far from over.  

Nancy Osborne, Nancy Osborne has had experience in the mortgage business for over 20 years and is a founder of both ERATE, where she is currently the COO and Progressive Capital Funding, where she served as President. She has held real estate licenses in several states and has received both the national Certified Mortgage Consultant and Certified Residential Mortgage Specialist designations. Ms. Osborne is also a primary contributing writer and content developer for ERATE.

"I am addicted to Bloomberg TV" says Nancy.

More Related Articles:

Feds put more teeth in Credit CARD Act

Banks Must Raise $74.6 billion; Losses From Bad Loans Could Total $600 billion

Lending Standards Stricter Industry Wide

Central Banks Show Unprecedented Unity in Coordinated Rate Cuts

As the Bailout Bonanza Continues, Shouldn't Borrowers Participate Too?


Fannie Mae & Jumbo Mortgage Rates

Just One Click! = Current Rate Chart

Pennsylvania Mortgage Rates Current Mortgage Rates - Hawaii Current Mortgage Rates - Alaska West Virginia Mortgage Rates Virginia Mortgage Rates District of Columbia Mortgage Rates Maryland Mortgage Rates Delaware Mortgage Rates New Jersey Mortgage Rates Connecticut Mortgage Rates Rhode Island Mortgage Rates Massachusetts Mortgage Rates New Hampshire Mortgage Rates Vermont Mortgage Rates New Hampshire Mortgage Rates Maine Current Mortgage Rates Vermont Mortgage Rates Current Mortgage Rates - New York Current Mortgage Rates - Michigan Current Interest Rates - Wisconsin Current Mortgage Rates - MINNESOTA Ohio Mortgage Rates Current Mortgage Rates - Kentucky Current Mortgage Rates - Indiana Illinois - Current Mortgage Rates Current Mortgage Rates - Iowa Missouri Mortgage Rates Current Mortgage Rates - North Carolina South Carolina Mortgage Rates Current Mortgage Rates - Florida Current Mortgage Rates - Georgia Current Mortgage Rates - Tennessee Current Mortgage Rates - Alabama Current Mortgage Rates - Mississippi Current Mortgage Rates - Louisiana Current Mortgage Rates - Arkansas Current Mortgage Rates - Oklahoma Current Mortgage Rates - TEXAS Current Mortgage Rates - New Mexico Current Mortgage Rates - Arizona Current Mortgage Rates - Kansas Current Mortgage Rates - Nebraska Current Mortgage Rates - Colorado Current Mortgage Rates - Wyoming South Dakota Mortgage Rates Current Mortgage Rates - North Dakota Current Rates - Montana Idaho Current Rates Washington Mortgage Rates Current Mortgage Rates - Oregon Current Mortgage Rates - Utah Current Mortgage Rates - Nevada Current Mortgage Rates - California

Start by selecting your state

Get the Updated and Improved Mortgage Rates App from

iPad for Mortgage Rates

Refinancing: Getting Started

Refinancing Info and Advice

Refinancing: Selecting a Loan

FREE Mortgage Rate Widgets
Your State's Rates or National Rates
Get this Widget for any State you want