loan accounts that are more than 60 days overdue on payments. This is often expressed as a percentage of total loans, and can also be called the 60-Plus rate.
60-Plus Delinquencies Details
Loan accounts on which the borrower has failed to make the minimum payment in over sixty days are called 60-Plus Delinquencies. The sixty days typically reflect two billing periods where the financial obligation has not been met.
This term most commonly refers to mortgages and other housing loans, but can also include automotive loans and credit cards. 60-Plus Delinquencies are reported to credit agencies, and can negatively impact your credit score for up to a period of 7 years.
Typically, you'll be more significantly impacted by a 90-day late payment than a 60-day late payment, and therefore it is in your best interest to make payments on delinquent accounts as soon as you are able. Derogatory marks like these can remain on your credit even if the owed balance is paid in full and the account is once again in good standing. This may hurt your ability to obtain new lines of credit, as lenders will use this information to glean insight into your financial habits and determine your credit-worthiness.
Example of 60-Plus Delinquencies
J&J Loans is a hypothetical company that offers a variety of loan options to customers, including housing loans. They are interested in assessing the number of loan accounts that they may become financially responsible for if they are defaulted on. This company chooses to monitor 60-Plus delinquencies for loans underwritten in the last two years.
They learn that in the last two years they have written 2,000 loans and of those, 10 are 60-Plus delinquencies. This means the company’s 60-Plus rate is 0.5%. In other words, 0.5% of their customers are more than 60 days behind on their payments.
The company would then look into services it may extend to those borrowers who are struggling to meet their financial obligations or simply continue to monitor those accounts to determine if further action needs to be taken.
Significance of 60-Plus Delinquencies
Creditors and lenders can use this statistic for internal purposes. The 60-Plus rate can be calculated by taking the number of loans that are 60 days late and dividing that number by the total number of loans that were underwritten over a certain time period, such as the last year. This percentage can help companies understand where their assets are, in terms of repayment. It is also used to identify loan accounts that may be at risk for default if the current financial behavior continues.
This insight creates awareness within companies, who will monitor these loans more closely, as many mortgage companies begin the pre-foreclosure process when loan payments are 90 to 120 days overdue. Nationally, this rate can be used as an indicator of the overall economic health of the country. If the national 60-Plus rate is increasing, this means that more people are having trouble making payments on money they have borrowed.
This trend could correlate to job losses, unemployment, and an unhealthy economy. If the 60-Plus rate is decreasing, this may signify financial health for the majority of borrowers, as they demonstrate the ability to meet financial obligations and make regular monthly payments.