The credit-reporting company found that the percentage of accounts in financial hardship started to moderate in June for credit products like mortgages, credit cards, auto loans and personal loans.
Accounts in “financial hardship” – which is defined by factors such as forbearance programs, deferred payments, frozen accounts or frozen past-due payments – have in large part kept delinquency numbers under control as the country continues to grapple with the economic fallout of COVID-19. TransUnion’s latest financial hardship data includes all hardship accommodations on file at the end of June and any accounts that were already in accommodation prior to the COVID-19 pandemic.
The number of consumers in financial hardship status does seem to be moderating now; after three months of large increases, the pace of financial hardship growth appeared to slow in June. The share of mortgages in financial hardship status has actually decreased from its May peak:
Mortgage Auto Credit card Personal loans
June 6.79% 7.21% 3.57% 7.03%
May 7.48% 7.04% 3.73% 6.15%
April 5% 3.54% 3.22% 1.56%
March 0.48% 0.64% 0.01% 0.26%
Financial hardship programs have helped keep delinquency numbers under control, according to TransUnion.
“Accommodation programs have provided consumers with much-needed payment flexibility as external triggers such as rising unemployment and a decrease in government relief funds have started to shape the future outlook of the consumer wallet,” TransUnion said.
“In the early months of the pandemic, unemployment benefits and relief from the CARES Act gave consumers a bit of a cushion, leaving the consumer fairly well-positioned from a cash-flow perspective,” said Matt Komos, vice president of research and consulting at TransUnion. “Lenders have been working with consumers during this time of uncertainty by extending financial hardship offerings that help them understand and manage their financial situation. These accommodations have been working as intended, and have helped thwart a material breakdown in delinquency performance in the near term.”
Since the outset of the pandemic, delinquency performance has remained fairly steady, with products across mortgage, personal loans, credit cards and auto loans all showing month-over-month improvements in delinquency rates. However, Komos warned that it was difficult to predict the direction the pandemic’s ultimate impact would take.
“By many accounts, we are still in the early phase of the pandemic, and there is some uncertainty still around the nature of the economic recovery we may experience,” he said. “It will likely be many months before the financial impacts of COVID-19 begin to materialize from a credit-performance standpoint, and some of this will be dependent on any additional government actions. During this period of time, lenders will need deeper consumer insights to better calibrate risk across their portfolios and make more informed decisions.”
MPA
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