WASHINGTON, D.C. — Both direct and indirect auto loan delinquencies showed improvement for the quarter, according to the American Bankers Association.

ABA reported that direct auto loan delinquencies dropped from 1.94 percent to 1.79 percent. Meanwhile, indirect auto loan delinquencies fell from 3.15 percent to 3.03 percent.

Reviewing credit trends across the board, ABA said delinquencies showed broad-based improvement for the third quarter in a row. Officials said this indicates a modest improvement in the U.S. economy. The composite ratio for the ABA's Consumer Credit Delinquency Bulletin, which covers eight closed-end installment loan categories, dropped 21 basis points to 2.98 percent of all accounts from 3.19 percent of all accounts in the previous quarter.

Bank card delinquencies fell more than half of one percent to 3.88 percent, which is below the 15-year average, the group reported. This is the first time since the second quarter of 2002 that bank card delinquencies have fallen below 4 percent.

James Chessen, ABA chief economist, said the improvements reflect concerted efforts by consumers to shore up their finances.

"It's clear that consumer balance sheets are improving. People are borrowing less, saving more and building wealth. These are all positive signs," he pointed out.

Further improvements in housing-related loan delinquencies show stability is returning to the housing market, Chessen said.

"This is the first inkling that stability is taking hold in the housing market, but the pace of recovery will still be long and drawn out," he said.

Home equity loan delinquencies fell for the first time in two years to 4.12 percent of all accounts from 4.32 percent in the previous quarter. Home equity lines of credit delinquencies fell nearly a quarter percent to 1.81 percent of all accounts from 2.04 percent in the previous quarter.

Property improvement loan delinquencies dropped to 1.40 percent of all accounts from 1.63 percent in the prior quarter.

"The overall risk in banks' consumer loan portfolios is improving and will continue to do so," Chessen said. "Banks are putting losses behind them and following a prudent approach to new loans because the on-again, off-again economy is keeping risk high.

"Regulators are also demanding that banks remain cautious. With job growth creeping back slowly and personal incomes rising a bit, I'm hopeful that improvements in consumer delinquencies will continue," he added.

Overall findings:

Closed-End Loans

Decreased Delinquencies:

Direct auto loan delinquencies fell from 1.94 percent to 1.79 percent.

Indirect auto loan delinquencies fell from 3.15 percent to 3.03 percent.

Home equity loan delinquencies fell from 4.32 percent to 4.12 percent.

Personal loan delinquencies fell from 3.63 percent 3.61 percent.

Property improvement loan delinquencies fell from 1.63 percent to 1.40 percent.

Increased Delinquencies:

Marine loan delinquencies rose from 1.63 percent to 1.93 percent.

Mobile home loan delinquencies rose from 3.41 percent to 3.65 percent.

RV loan delinquencies rose from 1.44 percent to 1.58 percent.

 

Open-End Loans

Decreased Delinquencies:

Home equity lines of credit delinquencies fell from 2.04 percent to 1.81 percent.

Bank card delinquencies fell from 4.39 percent to 3.88 percent.

Increased Delinquencies:

Non-card revolving loan delinquencies increased from 1.46 percent to 1.63 percent.