Defaults on loans have come down say banks

It looks like Americans are getting their household expenses in order, for banks claim that loan defaults have come down, as fewer mortgages have gone bad, and more and more people seem to be paying their bills on time.

Wells Fargo, one of the largest lenders stated on Wednesday that the loans that went bad were 29% lesser since the last 3 months of 2010 than the previous year.The late payments have also shown a decline since 2008 for the first time now.

According to the analysis by Barclays Capital, late payments on cards that were issued by JP Morgan Chase, Citigroup, and Bank of America have all improved at a considerable pace at the end of 2010.

This is a sure sign that the American population seems to have its finances under control and is in a more comfortable situation now.At least 70% of the US economy is related to the personal spending powers and a financially fit consumer is essential for a strong recovery economically.JPMorgan was quoted as saying that these were signs of stability and growth.

The spending last holiday season has been the strongest since 2006 and sales grew 11% in the auto industry last year – the first since 2005.

Looking at the spending patterns, the economy has shown a good recovery and is nearing the threshold of sustaining self-growth, state analysts from Citi Investment Research & Analysis in their report earlier this month.

Policymakers as well as economists have been waiting and looking for signs where the economy will be self-sustaining for its growth, rather than depending on outside support, like the decision made by the Fed to buy government bonds worth billions of dollars, to bring down the interest rates.

With the recent results things are looking optimistic for the banks.

The loan losses according to Citigroup have fallen 11% since the previous quarter and more customers have kept up with payments.This has been the sixth straight quarter where the losses are on the decline and this has allowed banks to release $2.3 billion from its reserves, that it has set aside for bad mortgage loans, and instead is reporting profits.JPMorgan and Wells Fargo whom have also reported bigger profits have also released loan reserves.

But in spite of these encouraging signs banks are still unwilling to loosen lending patterns.Even individuals are being hesitant now when it comes to borrowing in spite of having access to credit.

Jennifer Brown

Jennifer Brown, an external business consultant working with a Fortune 500 company, has years of experience to her credit. Despite having a busy schedule through the day, she takes time out to write articles dealing with credit cards, payday loans and other financial aspects. She has completed her Bachelor degree in Financial Services from Columbia University and has been actively involved in various activities for the betterment of society.