Consumers Still Pay the Credit Cards Bill Before the Mortgage


The trend of U.S. credit cardholders putting credit card payments ahead of mortgage payments that began in early 2008 shows no sign of abating in the immediate future even as the economy gradually improves, TransUnion LLC analysts say.

Despite a recent uptick in credit-card delinquency rates, the proportion of consumers falling behind on monthly credit card payments remains at near-record lows across the U.S., according to credit-bureau data TransUnion analyzed.

TransUnion’s findings stand in contrast to a recent report from Auriemma Consulting Group, which said consumers are starting to put a higher priority on making mortgage payments over credit-card payments.

Auriemma conducted a survey in September of 509 U.S. credit cardholders. The findings said that 77% of consumers were giving mortgage payments the highest priority, followed by 52% who cited utility payments and 38% who cited credit cards. The study illuminated a reversal of consumer sentiment compared with a similar study the firm conducted in 2009.

TransUnion declined to comment on Auriemma’s study.

Citing its data from recent years, TransUnion observed that before 2008, consumers for decades tended to pay their mortgage first “because it was their greatest asset,” says Steve Chaouki, group vice president for TransUnion’s financial services unit.

But the crash in home values that began in 2008, coupled with rising unemployment, caused consumers for the first time to begin putting a higher priority on making credit card payments over mortgages and auto loans.

“Consumers see that as their home values declined, credit cards represented liquidity, which is a more valuable commodity during an economic crisis,” Chaouki says.

The economy may be improving, but the underlying factors that put credit cards at the top of the bill-payment hierarchy persist, he says.

“We may see the payment hierarchy revert to the more-traditional setup where people pay their mortgages first when there is some real home equity to protect, or when credit becomes so freely available that it won’t be seen as a rare commodity to preserve,” Chaouki says.

It “will probably be a long time” before consumer credit lines, which many lenders cut during the crisis, become so abundant that consumers feel they can put credit card bills lower on the priority list, he says.

Daily Briefing | Friday, December 9, 2011

  • Fannie Demands Immediate Notification on MI Rescissions

    Fannie Mae recently told its seller/servicers that all mortgage insurance rescissions, cancellations and claim denials tied to loans it bought must be reported to the agency immediately.

  • Another Increase in Market Share for Loan Brokers

    Perhaps the future for loan brokers isn’t so bleak after all. Wholesale lenders table funded almost $33 billion of loans in the third quarter, giving the channel a 9.2% market share, according to new figures compiled by National Mortgage News and the Quarterly Data Report.

  • KBW: Treasury Can’t Stop Mortgage Rates from Rising in 2012

    Even with the housing market stabilizing and a settlement between megaservicers and state AGs on the horizon, the mortgage industry shouldn’t expect an increase in originations next year, according to a new forecast from Keefe, Bruyette Woods.

  • Arch Bay Tests Use of Borrower Rewards

    An industry hedge fund that selectively trades distressed mortgage assets is testing the use of borrower rewards for timely payment, with the aim of driving better performance, refinancing or modifications.

  • Warehouse Commitments at MetLife Bank Top $900 Million

    Although insurance giant MetLife Inc. is contemplating bids for its banking and mortgage divisions, the company’s warehouse lending unit is nearing the $1 billion mark in terms of commitments.

  • Former Production Chief at Union Launches Consulting Firm

    Craig Cole, a former mortgage production chief who recently retired from Union Bank, San Francisco, has launched a new consulting firm to advise clients on their jumbo lending and execution strategies.

  • Friday Deadline for MISMO Leadership Nominations

    The deadline to nominate industry professionals to serve on MISMO’s residential governance committee is today.

  • Isakson Bill Would Liquidate Fannie and Freddie, Create New Agency

    The federal government should create an entirely new secondary market agency for “high quality” private mortgages that would replace Fannie Mae and Freddie Mac, according to Sen. Johnny Isakson, R-Ga.

  • In War Over CFPB, Democrats Jockey for Political Advantage

    Just seven months ago, Democrats appeared to be boxed in, unable to confirm a leader to the Consumer Financial Protection Bureau without agreeing to demands from Senate Republicans to overhaul the agency’s structure.

Leave a Reply