Business Loan Delinquencies Rock Past Lehman Moment Level

Friday, August 19, 2016
By Paul Martin

by Wolf Richter
August 18, 2016

Leading Indicator of big trouble, now fermenting in the banks.

This afternoon, somewhat obscured by the Fed’s media-savvy and endless flip-flopping about rate hikes, the Board of Governors of the Federal Reserve released its second quarter delinquencies and charge-off data for all commercial banks. It shows that if the Fed wanted to raise rates before serious signs of trouble emerged, it might have missed the train.

Consumer loans are still doing well, though delinquencies have ticked up 10% from a year ago to $26.8 billion. Loans are considered “delinquent” when they’re 30 days or more past due. Credit card loans are also still doing well, though delinquencies have jumped 11% from a year ago to $13.8 billion.

Delinquencies of all real estate loans are low and still falling. Which is logical: commercial and residential real estate prices have been soaring for years. If borrowers get in trouble, they might be able to refinance and cure the delinquency, a form of “extend and pretend.” Or they might be able to sell the property and pay off the loan. Delinquencies in real estate don’t rise until property values are falling. That is now happening in some cities, but it hasn’t yet budged the national averages.

The Rest…HERE

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