Credit Card Delinquencies Are Rising

Posted on November 01, 2017 by Laura Lam

While it’s easy to ignore when the stock market is at record highs and unemployment is reassuringly low, household debt is on the rise.  The Center for Microeconomic Data’s (CMD) latest Quarterly Report on Household Debt and Credit reveals that total household debt rose by $114 billion (0.9%) to $12.84 trillion in the second quarter of 2017.  This increase put overall household debt $164 billion above its peak in the third quarter of 2008, and 15.1% above its trough in the second quarter of 2013

Consumer debt, in many ways, should generate more concern – during the good times.  The persistence of burdensome debt after a recovery underscores systemic problems. Jobs still fly to other countries amid the rosy numbers. College still gets more expensive and student debt accelerates. In some ways, prosperity can even guarantee a worsening debt crisis when, for example, neighborhoods gentrify and resident populations of homeowners and small businesses cannot keep up.

CMD delinquentSuch dynamics may help explain the recent data from the CMD.  While the 0.9% increase in total household debt may seem modest, serious credit card delinquencies rose for the third straight quarter, a trend that has not been seen since 2009 – which was right after an economic collapse.

The CMD findings are in synch with a Harris poll conducted in April for the National Foundation for Credit Counseling (NFCC). The NFCC 2017 Consumer Financial Literacy Survey found significantly more consumers carrying credit card debt from month to month, while nearly 20% of these respondents are rolling over $2,500 or more. At the same time, in a complete reversal of a trend that began with the 2009 recovery, U.S. consumers are spending less than the previous years.  In addition to the toll this takes on consumers, it’s concerning on an economic perspective – as no one benefits when people owe more without spending more.

Source: Forbes, Federal Reserve Bank of New York

Halloween Scares Up Record Sales

Posted on October 31, 2017 by Laura Lam

halloween spending 2017This may not be good news for your waistline, but your sweet tooth might appreciate it: Halloween candy sales are crackerjack this year.  Halloween candy sales are expected to rise 4.1% from last year, reaching a seasonally adjusted $4.1 billion, according to HIS Markit data.  “Consumer confidence is riding high, so consumers are likely to splurge a little more on edible goodies,” said David Deull, a senior economist with IHS Markit.

The sales increase is particularly impressive given that candy prices have dropped 0.9% compared with last year, marking the second consecutive Halloween candy price decline, according to IHS Markit data.  This is due to improvements in global cocoa production in recent years which created downward pressure on cocoa bean prices.

Does this mean more candy in your shopping cart?  The National Retail Federation (NRF) estimates more than 179 million Americans will be participating in some type of Halloween festivities, up from 171 million last year.  By the trade group’s calculations, this year’s total Halloween spending – for costumes, cards, decorations, candy and more – will end up hitting a record $9.1 billion, up from $8.4 billion in 2016.

The upbeat readings on Halloween sales fit with what most economists are saying about consumers’ mood, which has been improving along with gains in hiring, stable retail prices, rising home prices and growing retirement savings accounts.  The latest reading of consumer sentiment shows a surge for October, according to the University of Michigan Surveys of Consumers.

Economists generally say the positive outlook for Halloween bodes well for this year’s holiday shopping season, which is a bit longer than most years. In 2017, Christmas falls 32 days after Thanksgiving – one day more than in 2016. And this matters: Christmas falls on a Monday instead of Sunday, giving consumers an extra weekend day to do some last minute shopping.

“Although this year hasn’t been perfect, especially with the recent devastating hurricanes, we believe that a longer shopping season and strong consumer confidence will deliver retailers a strong holiday season,” NRF President and CEO Matthew Shay said.  The group estimates holiday sales will be up between 3.6% and 4%, for a total of between $678.8 billion and $682 billion.

Source:  NRF, NPR, HIS Markit

Best and Worst States for Consumer Credit Scores

Posted on October 30, 2017 by Laura Lam

state credit scoresConsumer credit varies nationally due to regional variations in income and the cost of living.  According to a new study from LendEDU and Experian, the Northeast had the highest average credit score (694). The Midwest (693), Pacific (691), and Rocky Mountain (690) regions followed closely behind. The Southeast (668) and Southwest (662) regions had the lowest credit scores on average.  The best average state scores are roughly 7% higher than the national average, while the worst states are about 7% lower.

Vantage Scores were used for the rankings. Scores of 700 and above are considered good, and below 650 is considered a poor score, according to Experian.

Credit scores take into account whether scoreholders paid bills late or not at all, as well as how much credit they have access to and how much of it they are using. Credit scores are used to determine whether people can qualify for some types of loans and borrowing, like mortgages, car loans, credit cards and personal loans. The interest rate paid on a loan can also be impacted by someone’s credit score.

Experian and two other credit reporting companies, TransUnion and Equifax, created VantageScore in 2006 through a joint venture that manages the business as an independent company. While FICO and Vantage credit scores use the same 300 to 850 range, the values are not identical because of differences in their proprietary scoring models.

The national average credit score was 682. A total of 29 states had an above average credit score.  Here’s how the 5 best and worst state VantageScores stack up.

  1. Minnesota – 722
  2. North Dakota – 713
  3. Vermont – 713
  4. New Hampshire – 712
  5. South Dakota – 711
  1. Alabama – 657
  2. Nevada – 657
  3. Georgia – 656
  4. Louisiana – 654
  5. Mississippi – 648
Source:  Newsmax/National Mortgage News

Best States for Halloween Candy

Posted on October 27, 2017 by Laura Lam

A recent analysis of Halloween candy purchases found that Oregon tops the list of best states to go trick-or-treating in based on how much money residents spend on candy, with 3 Musketeers as the favorite there.  Trailing in second place is neighboring Washington – choosing 100 Grand bars as the top treat – but Oregonians spend on average $11.64 more per person on Halloween sweets.

The top states and amounts spent per person on candy:

  1. Oregon ($40.29)
  2. Washington ($28.65)
  3. New Jersey ($24.36)
  4. Utah ($23.73)
  5. California ($19.72)
  6. New York ($19.08)
  7. Pennsylvania ($18.78)
  8. Illinois ($18.19)
  9. Virginia ($17.76)
  10. Wisconsin ($16.74).

What state ranks dead last? Ohio, where residents spend only $11.22 per person on average.

To gather the data, shopping app Ibotta looked at candy purchases the week before Halloween across the USA in 2015 and 2016. During that time, Americans spent an average $16.45 per person on sweets in the days leading up to Halloween.

Slacking until the last minute on buying those sweets could cost you. Oct. 30 is the worst day to buy treats, costing you $2.75 per unit of candy.  The day-before price hike is likely because the candy aisles are slim pickings on Halloween eve, and shoppers are just grabbing what’s available rather than hunting for the best deal, Ibotta said.  The magic number of days before the big day to do your candy shopping: Four (Oct. 27), when shoppers only spent $1.94 per unit.

Local trick-or-treating should figure among the best in the country this Halloween, as New Jersey ranks No. 3 in the country, spending an average of $24.36 on candy.  While a recent analysis found Jersey’s top candy to be Skittles, Ibotta found the state’s most frequently bought candy to be Snickers (both Skittles and Snickers are made by Mars, a company with a significant presence in New Jersey).

But we’d better be prepared for this onslaught of sugar. During the same time period, Ibotta found that New Jerseyans rank No. 13 in “oral care” purchases (items like toothpaste, floss and mouthwash).

Source:  USA Today/

Delinquency Rate Continues at 10-year Low

Posted on October 26, 2017 by Laura Lam

CoreLogic released its latest Loan Performance Insights report on national foreclosure and delinquency activity earlier this month.  According to the report, the share of mortgages that transitioned from current to 30-days past due was 0.9% in July 2017, down from 1.1% in July 2016. CoreLogic compares this to January of 2007 when “just before the start of the financial crisis, the current-to-30-day transition rate was 1.2% and peaked in November 2008 at 2%.”

In addition, it is noted that 4.6% of mortgages were in some stage of delinquency in July 2017 – a 0.9 percentage point year-over-year decline in the overall delinquency rate compared to last year.

Meanwhile, the foreclosure inventory rate measuring the share of mortgages in some stage of the foreclosure process “was 0.7% and the lowest since the rate was also 0.7% in July 2007.” Likewise, the data discovered the serious delinquency rate remained near the 10-year low of 1.7% reached in July 2007.

According to Dr. Frank Nothaft, Chief Economist for CoreLogic, while the U.S. foreclosure rate remains at a 10-year low, the rate across the 100 largest metro areas varies from 0.1% in Denver to 2.2 % in New York.  “The national serious delinquency rate remains at 1.9%, unchanged from June, and when analyzed across the 100 largest metros, rates vary from 0.6% in Denver to 4.1% in New York,” Nothaft said.

Additionally, CEO of CoreLogic Frank Martell said that even though delinquency rates are lower in most markets compared with a year ago, there are some worrying trends.  Martell explained that “markets affected by the decline in oil production or anemic job creation have seen an increase in defaults. We see this in markets such as Anchorage, Baton Rouge and Lafayette, Louisiana where the serious delinquency rate rose over the last year.”

Source:  CoreLogic

Housing Confidence on the Rise; Renters Optimistic

Posted on October 25, 2017 by Laura Lam

september housing optimismThe Fannie Mae Home Purchase Sentiment Index (HPSI) increased 0.3 points in September to 88.3, matching the all-time high set in June. The rise can be attributed to increases in 3 of the 6 HPSI components. The good time to buy component rose the most month-over-month, with the net share increasing 10 percentage points compared to August.

Renter respondents, in particular, buoyed the net good time to buy component, showing a substantial upward change in optimism in September. The net share who reported that now is a good time to sell a home rose 2 percentage points in September and is now up 23 percentage points compared to the same period last year. Meanwhile, the net share who said home prices will go up in the next 12 months fell 8 percentage points.

Even so, respondents continue to cite high home prices as the most important reason behind the bad time to buy and good time to sell indicators. The net share of those who believe mortgage rates will go down decreased 2 percentage points. Americans also expressed a slightly increased sense of job security, with the net share who say they are not concerned about losing their job increasing 1 percentage point. Finally, the net share of consumers who reported that their income is significantly higher than it was 12 months ago fell by 1 percentage point.

“The biggest driver for the increase in the HPSI is the rebound in the good time to buy sentiment,” said Doug Duncan, senior vice president and chief economist at Fannie Mae. “The survey showed a meaningful pickup in the good time to buy component, especially from the renter respondents. Additionally, perceptions of easing inventory helped boost the net share saying that now is a good time to buy, which is consistent with less bullish home price appreciation sentiment during the month. Overall, we believe that the devastating impacts of the hurricanes will likely weigh on home sales in coming months, posing downside risks for our forecast, which already calls for only a modest gain in home sales this year.”

Source:  Fannie Mae

Mortgage Default Rates Begin to Rise

Posted on October 24, 2017 by Laura Lam

mortgage defaultsMortgage defaults in September were slightly higher than in the previous month and are still lower than a year ago but they are closer to matching levels seen in 2016.  The default rate for first mortgages last month was 0.66%, up a basis point from August, but down a basis point from September a year ago, according to Standard & Poor’s and Experian.

Second-mortgage default rates were three basis points higher on a consecutive-month basis at 0.53% but were 3 basis points lower year-to-year.  The composite default rate for mortgage, bank card and auto loan credit was up 2 basis points from a month ago and down 2 basis points from a year ago at 0.88%.  The auto loan default rate in September was up 10 basis points from where they were the previous month, and the same as where they stood a year ago at 1.05%.  Card defaults were down 4 basis points from the previous month but up 29 basis points year-over-year at 3.15%.

“No sector is currently showing substantial increases or signs that consumers are facing financial stress. Other economic indicators through the summer echo consumers’ favorable condition: debt service as a proportion of income is modest while consumer credit and mortgage borrowing continue to see moderate,” said David Blitzer, managing director and chairman of the index committee at S&P Dow Jones Indices.

But upward pressure on defaults could increase.  “Consumers in some parts of the country may face other challenges that could shift the consumer credit default picture,” he said. “Hurricanes Harvey and Irma wreaked havoc across the South and Southeastern United States; more recent wildfires in California and the West are creating further damage and loss.”

Source:  National Mortgage News

Foreclosure Activity Plunges to 11-Year Low

Posted on October 23, 2017 by Laura Lam

Foreclosure activity hit an 11-year low in this year’s third quarter, as an improving economy and stricter mortgage standards helped stabilize the housing market to pre-2008 levels.  ATTOM Data Solutions released a report this week revealing that third-quarter foreclosure activity is down 13% from the previous quarter and 35% from a year ago.

The Q3 2017 U.S. Foreclosure Market Report showed a total of 191,824 U.S. properties with foreclosure filings, such as default notices, scheduled auctions or bank repossessions. This determined foreclosure activity in Q3 2017 was 31% below the pre-recession average of 278,912 properties with foreclosure filings per quarter between Q1 2006 and Q3 2007. The results of the study represented the fourth consecutive quarter where U.S. foreclosure activity has tracked below the pre-recession average.

“Legacy foreclosures from the high-risk loans originated between 2004 and 2008 have largely been cleared out of the distressed market pipeline,” said Daren Blomquist, senior vice president at ATTOM Data Solutions.  “Meanwhile, loans originated during the housing boom of the last five years are posting foreclosure rates below historic averages, with the notable exception of FHA loans originated in 2014, which have the highest foreclosure rate of any FHA loan vintage since 2009 — 29% above the historic average for FHA loans although still 55% below the peak in 2007.”

Counter to the national trend, 51 metro areas posted a year-over-year increase in foreclosure starts in Q3 2017, including Dallas-Fort Worth, Texas; Denver, Colorado; Cincinnati, Ohio; Cleveland, Ohio; and Columbus, Ohio.

Third quarter foreclosure activity was below pre-recession averages in 123 of the 217 metro areas analyzed in the report, officials said, including Los Angeles, Chicago, Dallas, Houston, and Miami.

Source: Attom Data Solutions/Financial Regulation News

Banks Prepare for Credit Card Defaults

Posted on October 20, 2017 by Laura Lam

Credit card delinquencies increased for three consecutive months, adding to signs that consumers in the U.S. are having a tough time paying their debt.  According to recent reports, credit card data from JPMorgan, Discover Financial Services and Bank of America show that the number of delinquencies is on the rise.

The reason for the uptick in the number of people who can’t pay their credit card bills is due to lenders going after consumers with less-than-stellar credit ratings. Although this practice is intended to fuel growth in a low-interest rate environment, the lower credit quality is coming back to bite them.

“A noticeable rise in delinquency rates – even from very low levels – is worth paying attention to,” said Andrew Haughwout, senior vice president at the New York Federal Reserve. “It is not clear yet what effect it will have on the future. But historically it has been the case that once these delinquency rates start to rise, they can continue to rise.”

The rates of delinquencies still remain below the levels during the financial crisis of 2008 and 2009, but any uptick means there will be higher loan losses for the financial companies.  In September, The Wall Street Journal reported that Capital One, Synchrony and Alliance Data Systems have all seen the rate of delinquencies among credit card holders increase as a percentage of their overall loans during the last few months.


Data Breaches Cost Firms $1.3 Million in 2017

Posted on October 19, 2017 by Laura Lam

Cyber attacks cost large North American businesses an average of $1.3 million in 2017, according to a new report from security vendor Kaspersky Lab and market research firm B2B International.  The companies surveyed more than 5,000 businesses across 30 countries to gather data on cyber security issues. The cost of data breaches and other attacks was up from $1.2 million in 2016, and totaled $117,000 per incident for small and medium businesses.

Companies are starting to view IT security as a strategic investment, the report said. The share of budgets spent on security is growing, reaching 18% compared with 16% in 2016. In 2016, the main reason businesses in North America wanted to increase IT security budgets was due to new business activities/expansion. But this year the increased complexity of IT infrastructure is driving budget increases.

However, while security appears to be receiving a larger proportion of the IT budget, the budget itself is getting smaller. The average IT security budget for enterprises worldwide dropped from $25.5 million in 2016 to $13.7 million in 2017.

Raising IT security budgets on a global scale is only part of the solution, the study said, but this allows businesses to take a proactive approach and avoid costly security costs when incidents occur. The top financial loss in North America when a data breach occurs stems from additional staff wages needed for enterprises, compared with loss of business and having to employ external professionals.

Source:  Information Management/Kaspersky Lab