One on One with Ezra Becker, Principal Consultant for Transunion
Tuesday, December 30, 2008
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SUSIE GHARIB: Our guest tonight says delinquencies on mortgages and car loans will reach their highest levels ever in 2009. Joining us now to talk more about that and other issues facing American consumers is Ezra Becker, a principal consultant with Transunion, one of the nation's largest credit bureaus. And Mr. Becker, a pleasure to have you on the program.
EZRA BECKER, PRINCIPAL CONSULTANT, TRANSUNION: Good evening. Thanks for having me.
GHARIB: Can you quantify how bad delinquencies will get in 2009?
BECKER: Certainly. So the numbers confirm everything that you just heard. Let's start with the biggest story which is mortgage delinquency. The incidents of delinquencies 60 days or worse, which is the proportion of consumers who are 60 days or beyond past due on a mortgage payment, historically is running about 2 percent. By the end of this year it's going to be about 4.7 percent. By the end of next year it'll be about 7.2 percent which is three and a half times increase over historical numbers. It's staggering. On the auto lending side, it's a similar story though not as severe. At the end of the third quarter, delinquency rates were at .8 of one percent. By the end of 2009, we expect them to be at about 1.03 percent. Not only is that a 30 percent increase over third quarter of this year, but it will be the first time since we've been tracking the statistic that it gets over 1 percent. (INAUDIBLE)
GHARIB: Go ahead, finish up with your thought.
BECKER: I was just going to say that indeed there's a significant deterioration in credit quality across the board for consumers.
GHARIB: So a lot of people are counting on a recovery in the housing industry in 2009. But how realistic is that if homeowners cannot meet their payments on their mortgages?
BECKER: So there's a silver lining here, believe it or not. There's a silver ling both for consumers and for lenders. For consumers, the silver lining really is that contrary to common belief, there is a lot of lending going on and there are certainly lenders out there that are willing and eager to make loans. These are generally tier two or smaller lenders that historically have been somewhat more conservative in their underwriting processes. So where as one might not be able to get a 0 percent down mortgage or an interest only loan as easily, traditional mortgages and auto loans are more readily available, one just has to know where to look for them. And indeed those tier two lenders consider this their power of ascendancy. In fact, many of them are recording record acquisition rates month over month.
GHARIB: Let me talk to you a little bit about the auto industry and to what extent these car loan delinquencies are a serious burden for the industry considering that auto makers are trying to also recover out of their slump.
BECKER: Well, I think the question of auto loan delinquency and its impact on the industry perhaps two separate questions. Many people do receive their auto loans through traditional financial institutions and not from captive auto finance lenders. The recent news on the bailout of the auto industry will hopefully have a positive effect overall for that entire market. What I can tell you though, is that one can't look at auto loans in a vacuum from other types of loans. Consumers have a mix of loans, whether it's auto, mortgage and credit card and even if the auto industry were to improve dramatically, problems, continuing problems in the mortgage industry and in the economy in general will still have a market impact on consumer performance.
GHARIB: We just have a little bit of time left. What advice do you have for people who are falling behind on their payments whether it's their mortgages or their credit cards or their loans?
BECKER: Sure. Well, of course the best way to maintain one's credit profile is to make payments when ever humanly possible on time, consistently and regularly. If you find that you're going to be unable to make a payment, the best thing to do is to get in touch with your lender ahead of time and work with them to come up with a resolution to that, to indicate your good intentions to pay that debt in the long term, and find some way -- they will be much more flexible given current conditions to find a way to work with you to solve that problem, that temporary liquidity crunch.
GHARIB: All right, well, thank you very much for all of your thoughts, we appreciate your coming on the program.
BECKER: Thank you for having me.
GHARIB: My guest tonight, Ezra Becker of Transunion.
