Nonhome Finance Write-Offs Hit Lowest Level in Six Year

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Nonhome finance write-off dollars year-to-date through April have decreased 52 percent, according to Equifax’s April National Consumer Credit Trends Report. The write-offs have decreased to $26.2 billion as of April 2012 from $54.1 billion in April 2009. Today’s write-offs approach 2006 pre-recession levels of $24.0 billion and continue an improving trend.

Nonhome finance write-off dollars have declined due to both improvements in general repayment patterns and lower numbers of bankruptcies. Bankruptcy dollars have declined at a slower rate, comprising 15.7 percent of write-off dollars in 2009 but 18.5 percent of write-off dollars today.  This is due to faster declines in the average dollar size of general delinquencies, relative to the peak of the recession.

Nonhome finance balances declined by 7 percent or $193 billion since October 2008, but the deleveraging trend ended about a year ago, with balances now 1.5 percent higher than in May 2011.

Auto balances are increasing following the trend in rising auto sales, while card balances are declining at a slower rate due to sustained origination increases and payment improvements that mirror pre-recession levels.

Based on current trends, card balances will stop declining and begin increasing during 2012. With the continued weakness in labor markets, demand for additional education is very strong.  As a result, student lending balances rose 66 percent to $766 billion in November 2011 (from the pre-recession average of $460 billion) before falling back to $753 billion as of April 2012.

Other highlights from the data include:

  • Home finance balances have decreased $1.2 trillion since October 2008, posting a fourth consecutive year of decline.
  • Home finance real estate owned dollars (write-offs) for April 2012 have dropped 29 percent from April 2010 to $71.5 billion and is at the lowest level since 2008 ($74.7 billion).
  • In April 2012, home equity revolving balances were near $560 billion, down $115 billion from April 2009 and down $43.8 billion from April 2011.
  • Foreclosures in process for home equity revolving credit dropped 37 percent from same time a year ago. At just under $1.25 billion, this is the lowest in two years.
  • As of April 2012, the number of outstanding auto loans is at 57 million, the highest since January 2010. Balances on these loans have risen from $689 billion in April 2011 to $734 billion in April 2012.
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