This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

How Fast Can the U.S. Economy Grow With So Many Delinquent Loans?

NEW YORK (TheStreet) -- A report this week by the Urban Institute that analyzed the credit files of 7 million Americans shows why the U.S. economy may not be as strong as yesterday's report from the Commerce Department on second-quarter growth may have indicated.

The government reported that gross domestic product rose at a seasonally adjusted 4% annual rate in the second quarter, compared with a decline of 2.1% in the first quarter, which was revised from a decline of 2.9%.

But the Urban Institute reported that about one-third of adults in the U.S. who have a credit file have a report of debt in collections.

Why the Fed Is Right to Sit Tight on Rates

"These adults owe an average of $5,178 (median $1,349). Debt in collections involves a nonmortgage bill -- such as a credit card balance, medical or utility bill-that is more than 180 days past due and has been placed in collections," the report says.

Furthermore, "5.3 percent of people with a credit file have a report of past due debt, indicating they are between 30 and 180 days late on a nonmortgage payment," the report states.

Note that these are people with credit files. The report states that about 22 million adults don't have credit files. That is roughly 9% of the population.

The report says many low-income consumers cannot access traditional credit and may still be delinquent on debt.

So one could argue that more than 40% of adults in the U.S. are delinquent on loans. And that accounts for just non-mortgage debt.

A survey of the Mortgage Bankers Association says that slightly more than 5% of mortgages outstanding are 90 days or more delinquent. The number is down substantially over the past several years, but is still a relatively high number historically.

Also, this week, the Wall Street Journal reported that the Home Affordable Modification Program -- a program produced by the Obama administration to help people work out the payment process on their mortgage loans -- is facing a problem in dealing with the loans. The program's backlog has jumped to 221,000, substantially higher than just a couple of months ago.

Meanwhile, wages are not increasing much, and the rising stock prices sought by Federal Reserve Chairmen Ben Bernanke and Janet Yellen to spur the economy are not helping those with debt problems who don't own stocks.

Some people keep looking for good news about an U.S. economy that is going to accelerate in the future. My question is, how can the U.S. economy really accelerate much faster with debt problems that haven't been resolved yet?

Kass: Has the Auto Industry Peaked?

This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
AAPL $95.18 1.64%
FB $117.43 -0.96%
GOOG $692.36 -0.84%
TSLA $232.32 -3.92%
YHOO $36.01 -1.42%


Chart of I:DJI
DOW 17,750.91 -140.25 -0.78%
S&P 500 2,063.37 -18.06 -0.87%
NASDAQ 4,763.2240 -54.37 -1.13%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs