Loan Delinquencies Edge Lower in Q2, but Some Remain at Very High Levels. Here's What It Means for Investors.
Perhaps now more than ever, there are two parallel economies, with each one doing its own distinct thing.
Overview
Economic data continues to send mixed messages. That's the takeaway from the Federal Reserve's second-quarter snapshot of U.S. consumer loans anyway. The total number of loans that were delinquent by 90 or more days fell from 2.91% a year earlier to 2.57% in the second quarter of this year, down from Q1's figure of 2.83%.
There are pockets of problems, however. Mortgage delinquencies edged measurably higher -- again -- as did past-due auto loans. Indeed, car loan delinquencies are showing signs of serious trouble, moving back within sight of multiyear highs.
Details
There's an important nuance that's not readily evident in the Fed's main numbers, however. That is, subprime loans (loans granted to borrowers with lower credit scores) account for a significant share of the recent weakness. For instance, the Fed's data indicates that while the second quarter's subprime mortgage loan delinquency rate of 1.86% was a hair lower than Q1's 1.88%, the rate is still near a multiyear high. As the Mortgage Bankers Association's vice president of industry analysis, Marina Walsh, recently noted, while "mortgage delinquencies decreased [sequentially] slightly across all loan types in the second quarter of 2026 ... the broader trend is that both delinquencies and foreclosures have increased over the past year."
Source
Originally published at www.fool.com.