What is ‘Delinquent’
Delinquent describes something or someone that fails to accomplish what is required by law or duty, such as the failure to make a required payment or perform a certain action. Delinquency occurs when an individual or corporation with a contractual obligation to make payments against a loan in a timely manner, such as through a mortgage, does not make payments on time. In the case of a mortgage, the lender can initialize foreclosure proceedings if the mortgage is not brought up to date within a certain amount of time.
BREAKING DOWN ‘Delinquent’
The term “delinquent” commonly refers to a situation where a borrower is late or overdue on a payment, such as income taxes, a mortgage, an automobile loan or a credit card account. There are consequences for being delinquent, depending on the type, duration and cause of the delinquency. People who are late with a credit card payment may be forced to pay a late fee. “Delinquent” also refers to the failure to perform a duty or act in a manner expected of a person in a particular profession or situation. For example, a police officer who does not act in a manner to fulfill his duty to protect could be found delinquent.
Delinquent vs. Default
In a financial sense, delinquency occurs as soon as a borrower misses a payment. This differs from a loan default, which occurs when a borrower fails to repay the loan as specified in the original contract. Most creditors allow a loan to remain delinquent for a period of time before considering it as default; the duration depends on the creditor and loan type. The U.S. federal government allows student debt to be delinquent for 270 days before declaring it to be in default.
Current and Historical Delinquency Rates
Delinquency rates in the U.S., according to data provided by the Federal Reserve, have been steadily declining since reaching a Great Recession-high of 7.4% in the first quarter of 2010 (11.3% delinquency rate on residential real estate loans).
As of the third fiscal quarter of 2017, delinquency rates in the U.S. banking sector as a whole were 3.6% on residential real estate loans, 0.8% on commercial real estate loans and 2.3% on consumer credit card loans. The delinquency rate on total U.S. loans and leases sold by banks in the same period was 1.8%, the lowest it’s been since the mortgage crisis of 2007 and subsequent financial crash.
Before the second quarter of 2008, delinquency rates on total U.S. loans and leases sold by banks hadn’t exceeded 3% since the first quarter of 1994.