U.S. borrowers in hardship jumped in April: study

(C) Reuters. FILE PHOTO: Outbreak of the coronavirus disease (COVID-19) in Massachusetts

By Imani Moise

(Reuters) – The number of U.S. borrowers seeking help on mortgages, credit cards and auto loans jumped between March and April in the economic fallout from the coronavirus pandemic, a TransUnion (N:TRU) study released on Wednesday showed.

Serious delinquency rates for accounts 60 or more days past due were little changed across loan types, but forbearance programs and stimulus payments have been helping consumers stay liquid in the short term, said Matt Komos, vice president of research and consulting at the credit monitoring firm.

“While these programs are providing consumers with temporary relief, banks and lenders are looking for further regulatory guidance as to what next steps should be taken once stimulus packages dry up,” he said. “We are likely to have a better sense of the true financial health of consumers impacted by COVID-19 in the coming months.”

Another early indicator points to a steeper deterioration of credit quality. The percentage of credit cards considered in hardship, or having a deferred payment or frozen account, rose to 3.2% from 0.1% in March and 0.03% a year earlier. Five percent of mortgages were considered in hardship, up from 0.5% in both March and the year ago period.

The hardship numbers may still be understated as some major lenders have promised to protect customers from negative credit impacts related to the pandemic. Large lenders including Bank of America Corp (N:BAC) and Citigroup Inc (N:C) have said they would not immediately report participation in COVID-19 assistance programs to credit reporting agencies.