Mortgage Troubles Stick Around For Distressed Consumers

It’s not exactly a season to be jolly, as consumer confidence has dropped, the housing picture has deteriorated, and expenses have gone up in the past quarter, forcing consumer financial health to its biggest drop since 2008 after rising for three straight quarters, finds the latest CredAbility Consumer Distress Index.

During the quarter, mortgage delinquencies, late payments by apartment dwellers, and rising housing expenses as a percentage of gross income all increased, factoring into rising consumer distress. While unemployment rates remained steady, the under-employment rate of those working part-time for economic reasons grew to 9.3 million, up 700,000 from the previous quarter.

CredAbility measures employment, housing, credit, how families manage household budgets, and net worth to determine the financial health of the average U.S. household, which scored 66.7 on the Index’s 100-point scale in the third quarter. This is a decline from 69.2 in the second quarter of 2011, and the largest drop since the third quarter of 2008. A score beneath 70 indicates a state of financial distress.


Nationally, consumers have now been experiencing financial distress for 12 consecutive quarters, and the third quarter’s findings drag down a string of rising scores from five out of the past six quarters.

“The fragile gains made during the past one and a half years have been swept away in a single quarter,” said Mark Cole, chief operating officer of CredAbility and author of the Consumer Distress Index, in a statement. “The mortgage delinquency rate is no longer improving and household budgets are being squeezed by rising gas and food costs. Unless consumers are willing to borrow, they’ll need to scale back their holiday spending.”

As far as states go, Nevada had the lowest Index score, at 59.70, with North Dakota scoring the highest at 81.42. Only 19 states and the District of Columbia aren’t in financial distress, with scores above 70, and in the third quarter, nine states’ index scores put them back into financial distress.

The housing category dropped nearly six points to 63.84, with mortgage delinquency rates increasing from 7.08% to 8.27% in the quarter.

However, the credit category score rose more than two points to 84.95, the highest score in more than 15 years, says CredAbility, with consumers managing their credit well and delinquency rates on credit cards and other consumer loans falling.

View the 2011 Q3 CredAbility Consumer Distress Index.

Written by Alyssa Gerace

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  • There is a reason why it is called the Great Housing Depression.  With no leadership from the White House in the housing area, why is the result surprising?  The President is tired of making the case that his programs are helping millions of homeowners when even Democrats have only been able to justify about one million and many of those are in precarious situations.
    The housing segment of the economy is not a great one for the party of FDR.  We all wished it were. 
    Who in our industry does not want to see us endorsing 150,000 HECMs (or more) for 2012?  Based on the predictions of others, I have a hard time talking about 70,000 endorsments for even this calendar year.  That is painful.

    Things are tough right now in our industry and the near horizon is not one for great cheer for the industry.  It is great to see most of the Top Ten doing better but that appears to be a relative and temporary situation.  So there is something to cheer about but it is not much.

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