A new TransUnion (NYSE: TRU) report found the total percentage of
accounts in “financial hardship” status dropped during the month of
July for auto loans, credit cards, mortgages and personal loans –
marking the first such decrease since the start of the COVID-19
pandemic. The report defines accounts in financial hardship by
factors such as a deferred payment, forbearance program, frozen
account or frozen past due payment.
TransUnion found that while fewer accounts are in financial
hardship status as of late, credit performance has continued to
hold steady and has not shown a material deterioration. To gain
greater insight into the performance and payment behaviors of
consumers during the COVID-19 pandemic, TransUnion has supplemented
its quarterly Q2 2020 Industry Insights Report with its Monthly
Industry Snapshot Report, highlighting the consumer credit market
for the month of July.
“Overall the consumer credit market has been performing quite
well despite the obvious challenges brought on by the COVID-19
pandemic,” said Matt Komos, vice president of research and
consulting at TransUnion. “It’s a reassuring sign that delinquency
levels have remained relatively low – especially as the percentage
of consumers in financial hardship status has started to decline.
While we still expect to see future delinquencies rise based on
macroeconomic factors, it is clear that government stimulus
programs and accommodation programs provided by lenders are helping
the market withstand these challenges in the near-term.”
Accounts in Financial Hardship Status
Declining
Timeframe |
Auto |
Credit Card |
Mortgage |
Personal Loans |
July 2020 |
6.16% |
2.83% |
6.15% |
6.92% |
June 2020 |
7.20% |
3.57% |
6.79% |
7.03% |
May 2020 |
7.04% |
3.73% |
7.48% |
6.15% |
April 2020 |
3.54% |
3.22% |
5.00% |
3.57% |
March 2020 |
0.64% |
0.01% |
0.48% |
1.56% |
July 2019 |
0.41% |
0.01% |
0.75% |
0.25% |
*TransUnion’s financial hardship data includes all
accommodations on file at month’s end, and includes any accounts
that were in accommodation prior to the COVID-19 pandemic.
The percentage of accounts in financial hardship appeared to hit
their peak during the months of May and June – a time when many
consumers were feeling the combined impacts of reduced work hours,
shelter-in-place orders, unemployment and dwindling stimulus funds.
The recent reduction in account hardship levels may indicate that
the number of consumers in financial distress has leveled off as
performance for these products has maintained steady levels.
Serious delinquencies (60 – 90 days past due) showed a
month-over-month improvement from June 2020 to July 2020 across
most credit products. Credit card, mortgage and personal loans also
showed a substantial year-over-year decline in delinquency compared
to performance in July 2019. The presence of federal programs and
those provided by lenders, however, may have alleviated some of the
financial hardship borrowers are facing.
July Industry Snapshot of Consumer-Level
Delinquency Performance by Credit Product
Timeframe |
Auto |
Credit Card |
Mortgage |
Personal Loans |
Percentage of Borrowers 60 or More Days Past Due
(DPD) |
July 2020 |
1.43% |
1.37%* |
1.08% |
2.79% |
June 2020 |
1.50% |
1.48%* |
1.07% |
3.11% |
July 2019 |
1.31% |
1.61%* |
1.41% |
3.10% |
Percentage of Borrowers 30 or More Days Past Due
(DPD) |
July 2020 |
3.00% |
2.58% |
1.81% |
3.77% |
June 2020 |
3.17% |
2.66% |
1.83% |
4.34% |
July 2019 |
3.74% |
3.52% |
2.68% |
4.6% |
*Credit card delinquency rate reported as 90+ DPD per industry
standard; all other products reported as 60+ DPD
Another positive sign from the report can be found via the
30-day delinquency metric – typically an early red flag that an
account will default and potentially be charged off. These
delinquency levels have shown signs of improvement in the month of
July across auto, credit card, mortgage and personal loans compared
to June as well as one year ago.
Despite this indication that consumers are not falling behind on
payments, consumers are still expressing concern about their
ability to pay bills. TransUnion’s latest Financial Hardship Survey
from late July found that 57% of Americans have been financially
impacted by the COVID-19 pandemic. Of those consumers, 77% said
they are concerned about their ability to pay bills and loans. They
expect they will not be able to pay their bills or loans in about
six weeks and anticipate an average budget shortfall of around
$875. The level of concern is now at its highest level since
TransUnion began tracking this variable in late March.
“As more accounts come out of financial hardship status, lenders
will be actively monitoring payment behaviors to gauge whether
consumers can withstand these economic pressures and do so without
government assistance or lender support. How consumers are able to
manage debt levels and access to credit will be a key indication of
economic recovery in the coming months,” said Komos.
TransUnion’s Q2 2020 Industry Insights Report and Monthly
Industry Snapshot Report features insights on consumer credit
trends around personal loans, auto loans, credit cards and mortgage
loans. For more information, please register for the TransUnion Q2
2020 IIR Webinar. Additional resources for consumers looking to
protect their credit during the COVID-19 pandemic can be found
at transunion.com/covid-19.
Despite Growing Delinquencies, Auto Payments Remain
Fairly Consistent Q2 2020 IIR Auto Loan
SummaryDuring the second quarter, lenders began tightening
their lending criteria in the auto market as performance started to
show initial signs of deterioration. Consumer level delinquencies
(60+ DPD) reached 1.50% in Q2 2020, an increase of 27 basis points
(bps) from Q2 2019 and the largest such increase from the previous
11 quarters. While overall delinquencies saw an uptick, most lender
types including banks, captives and credit unions have experienced
a downward monthly trend in delinquency since the pandemic began.
Conversely, independent auto lenders have been experiencing a
monthly increase in 60+ DPD. This recent deterioration in
performance, along with economic stressors presented by the
COVID-19 pandemic, has resulted in lender pullback across all risk
tiers, but has been primarily driven by subprime and near prime.
Overall originations declined -5.8% year-over-year for a total of
6.3 million new loans.
Instant Analysis “Traditionally auto loans have
been a payment consumers make even in times of economic distress as
a vehicle is the main source of transportation and the lifeblood
for many consumers in their daily lives. While there has been some
recent deterioration in terms of auto performance, this may be the
result of consumers having less cash flow as stimulus funds begin
to run out. Lenders are likely to continue monitoring delinquency
levels – especially as accommodations expire or stimulus benefits
run out – to determine future risk mitigation strategies across the
portfolio.”
– Satyan Merchant, senior vice president and
automotive business leader at TransUnion
Q2 2020 Auto Loan Trends
Auto Lending Metric |
Q2 2020 |
Q2 2019 |
Q2 2018 |
Q2 2017 |
Number of Auto Loans |
83.5 million |
82.7 million |
80.9 million |
77.4 million |
Borrower-Level Delinquency Rate (60+
DPD) |
1.50% |
1.23% |
1.22% |
1.23% |
Average Debt Per
Borrower |
$19,457 |
$18,974 |
$18,700 |
$18,486 |
Prior Quarter
Originations* |
6.3 million |
6.7 million |
6.8 million |
6.7 million |
Average Balance of New Auto
Loans* |
$22,372 |
$21,418 |
$20,901 |
$20,415 |
*Note: Originations are viewed one quarter in arrears to account
for reporting lag
Card Issuers Tighten Credit Standards while Consumers
Continue to Pay Down Balances
Q2 2020 IIR Credit Card SummaryTo address
growing market uncertainties, card issuers have tightened credit
over the past quarter with total credit lines on new accounts
declining -8.3% year-over-year to $78 billion, the first decrease
observed since Q1 2018. The average credit line issued to new
accounts decreased -9% year-over-year to $5,257, and a decline was
seen across all risk tiers. Consumers continue to pay down card
balances, with the average debt per borrower decreasing from $5,645
in Q2 2019 to $5,236 in Q2 2020. These payments, as well as an
increase of hardship accommodations, have resulted in steady
performance for the sector, improving to 1.47% (90+ DPD).
Instant Analysis
“Following several quarters of hyper growth, the
COVID-19 crisis has driven a significant slowdown in origination
activity and a decrease in credit lines as lenders look to hedge
risk. The additional liquidity afforded by deferral programs and
government aid – combined with lower spend and larger payments –
has allowed consumers to reduce card balances in the near-term and
has largely kept delinquencies in check. However with many of these
programs set to expire at the end of the third quarter, we expect
this will have an impact on future performance.”
– Paul Siegfried, senior vice president
and credit card business leader at TransUnion
Q2 2020 Credit Card Trends
Credit Card Lending
Metric |
Q2 2020 |
Q2 2019 |
Q2 2018 |
Q2 2017 |
Number of Credit
Cards |
451.5 million |
437.1 million |
420.0 million |
409.8 million |
Borrower-Level Delinquency Rate (90+
DPD) |
1.47% |
1.71% |
1.53% |
1.46% |
Average Debt Per
Borrower |
$5,236 |
$5,645 |
$5,543 |
$5,422 |
Prior Quarter
Originations* |
15.5 million |
15.3 million |
14.5 million |
15.0 million |
Average New Account Credit Lines* |
$5,257 |
$5,773 |
$5,649 |
$5,817 |
*Note: Originations are viewed one quarter in
arrears to account for reporting lag.
COVID-19 Slows Growth in Personal Loan Market
Q2 2020 IIR Personal Loan SummaryThe growth
exhibited by the personal loan market over the prior several
quarters slowed in Q2 2020, the first full quarter of COVID-19
impacts. Total personal loan balances reached $156 billion, a 5.3%
year-over-year increase and the slowest rate of growth since Q4
2012. This is a strong indication of COVID-related pullback,
particularly in below-prime tiers. Personal loan performance has
not shown any material deterioration as overall consumer level
delinquency (60+ DPD) in Q2 2020 decreased slightly to 3.08%. This
is accounted for by consumers taking advantage of forbearance
initiatives as well as the recent mix shift toward lower risk
consumers. Originations in Q1 2020 grew by 3.8% year-over-year, a
significant reduction compared to the 8.2% growth in Q1 2019. Most
of the growth was concentrated in prime and above risk tiers as
lenders started tightening underwriting standards in the second
half of March.
Instant Analysis “COVID-19 significantly
impacted the personal loan market this past quarter as the number
of consumers carrying a balance saw a quarterly decrease for the
first time since Q1 2017, in spite of a year-over-year increase.
This was driven by a combination of lenders tightening underwriting
standards and a decrease in consumer demand driven by stimulus
checks and stay-at-home orders driving down consumer spending. We
expect lenders to cautiously ramp up origination volumes in Q3 with
a continued focus on lower risk consumers. And as consumers start
to roll off forbearance programs over the coming months we expect
lenders to keep an eye on future delinquency levels.”
– Liz Pagel, senior vice president and consumer lending
business leader at TransUnion
Q2 2020 Unsecured Personal Loan
Trends
Personal Loan Metric |
Q2 2020 |
Q2 2019 |
Q2 2018 |
Q2 2017 |
Total Balances |
$156 billion |
$148 billion |
$125 billion |
$107 billion |
Number of Unsecured Personal Loans |
22.2 million |
21.6 million |
19.5 million |
17.3 million |
Number of Consumers with Unsecured Personal
Loans |
20.0 million |
19.6 million |
17.9 million |
16.1 million |
Borrower-Level Delinquency Rate (60+
DPD) |
3.08% |
3.12% |
3.21% |
3.02% |
Average Debt Per
Borrower |
$9,102 |
$8,856 |
$8,198 |
$7,781 |
Prior Quarter
Originations* |
3.9 million |
3.8 million |
3.5 million |
2.8 million |
Average Balance of New Unsecured Personal
Loans* |
$6,690 |
$6,790 |
$6,443 |
$6,430 |
*Note: Originations are viewed one quarter in arrears to account
for reporting lag.
Historically Low Interest Rates Boost Origination
Volumes, Particularly for Mortgage Refinance Q2
2020 IIR Mortgage Loan SummaryWith interest rates hitting
their lowest level in three years, mortgage originations spiked in
Q1 2020 and reached 2.2 million, which was 80% higher compared to
the same period last year. Of these originations, 51% were purchase
originations and the remaining 49% were refinance originations –
compared to last year in the same quarter where 74% were purchase
originations and 26% were refinance originations. Of the total
refinance volumes this quarter, 61% were Rate and Term refinance
and 39% were Cash-Out refinance. Last year at the same time, 36% of
refinance originations were Rate and Term refinance, while 64% were
Cash-Out refinance. Average new account balances for new
originations grew 12% year-over-year. Average new account balances
for purchase loans grew 10%, while average new account balances for
Rate and Term refinances grew 3% and Cash-Out Refinances grew 15%
in Q1 2020.
Instant Analysis “In Q1 2020 we observed
a higher rate of origination growth for 15 and 20/25 year loans
than 30 year loans for purchase mortgages. 15 and 20/25 year
purchase loans grew 52% and 53% year-over-year, while 30 year
purchase loans grew 21% year-over-year. Our low interest rate
environment allows borrowers to better afford higher monthly
payments that come with shorter term loans. On average, the spread
between the 15 year and 30 year mortgage rates in Q1 2020 was 54
basis points and consumers leapt at the chance to take advantage of
that.”
– Joe Mellman, senior vice president and mortgage
business leader at TransUnion
Q2 2020 Mortgage Trends
Mortgage Lending
Metric |
Q2 2020 |
Q2 2019 |
Q2 2018 |
Q2 2017 |
Number of Mortgage
Loans |
50.5 million |
49.8 million |
49.5 million |
49.6 million |
Account-Level Delinquency Rate (90+
DPD) |
0.93% |
1.07% |
1.37% |
2.22% |
Prior Quarter
Originations* |
2.2 million |
1.2 million |
1.3 million |
1.4 million |
Prior Quarter Average Balance of New
Mortgage Loans* |
$291,418 |
$260,181 |
$249,540 |
$238,981 |
Borrower-Level Delinquency Rate (90+
DPD) |
0.78% |
0.91% |
1.14% |
1.38% |
Average Debt Per
Borrower |
$215,178 |
$209,402 |
$203,887 |
$198,045 |
*Note: Originations are viewed one quarter in arrears to
account for reporting lag.
About TransUnion (NYSE: TRU)TransUnion is a
global information and insights company that makes trust possible
in the modern economy. We do this by providing a comprehensive
picture of each person so they can be reliably and safely
represented in the marketplace. As a result, businesses and
consumers can transact with confidence and achieve great things. We
call this Information for Good.®
A leading presence in more than 30 countries across five
continents, TransUnion provides solutions that help create economic
opportunity, great experiences and personal empowerment for
hundreds of millions of people.
http://www.transunion.com/business
Contact |
Dave
Blumberg |
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TransUnion |
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E-mail |
dblumberg@transunion.com |
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Telephone |
312-972-6646 |
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