BY MORGAN LEGEL
With as many as 38,000 out of work and waiting on a stimulus check to help with everyday finances, the amount of consumer debt deferment on the island is rising, even as the coronavirus outbreak seems to be diminishing.
Car loans, personal loans, student loans, home loans, credit card debt, utilities — are all obligations that still need paid whether people are working or not.
As the Journal has reported, deferments on all sorts of financial obligations are common.
Philip J. Flores, CEO of BankPacific, said while the majority of the bank’s home loans are sold to a government sponsored enterprise, like Freddie Mac, the bank has granted deferments to all who have requested for one on the loans it holds. He also said all deferment requests for auto and personal borrowers affected by the economic shutdown have been granted, and the same deferment requests for commercial borrowers have also been approved.
As to quantifying how much debt people are carrying, Flores said, “Since the lockdown of our economy, we have not seen a run up of debt in any form other than small business paycheck loan applications. There has also been no increase in loan payoffs, rather we have seen a sharp increase in payment deferment requests.”
Flores did not reveal any amount of money correlated to debt on the island, as he said “numbers are relative.”
As far as taking on new loans, While Flores said BankPacific advises people to not borrow money they don’t need, he said now would be a good time to purchase a home.
“The demand for residential real estate loans has fallen the past couple of years due to the lack of inventory of existing homes for sale and the slowdown in the construction of new homes because of the absence of a sufficient number of H-2B construction workers,” Flores said.
“However, there is still an active market for homes. And this would also be a great time for someone to refinance their home loan since mortgage rates are at a historic low.”
Joaquin L.G. Cook, vice chairman of the board for Bank of Guam told the Journal spending patterns have changed.
“Since February, personal account balances both on average and as total have increased, and credit card balances have decreased; savings are growing and debt is reducing (slightly) and definitely not increasing,” he said.
He noted while he originally thought the opposite, many people still have some form of income, and that coupled with the reduced spending over the period due to lock down, restaurants/bars closing, no travel happening, no retail open, etc., has created a shift in finances.
“Payment deferment options have kept money in people’s hands. They haven’t had the obligations to make monthly payments,” he said.
Cook also said while this is true now, things might change the longer the virus is attacking.
“It is still early on in the pandemic. I would like to see data after April and May; trends may change if people are not able to get back to work soon.”
When it comes to consumer utilities debt on Guam, GWA shared during a Guam Power and Water Authority board meeting on April 28, that 487 accounts, totaling $310,878 remain unpaid. GPA does not yet have billing and payment data beyond February.
GWA’s $8.8 million total operating revenues for March were $1.3 million less than budget, as well as $856,000 less than March 2019, due to the impact of the COVID-19 emergency.
GPA revealed it is down 9% in power demand for late March and April, with a projected revenue loss of $390,535 for March and $1,167,730 for April.
The Federal Reserve Bank of New York’s Center for Microeconomic Data on May 5 issued its Quarterly Report on Household Debt and Credit, which showed that as at March 31, total household debt increased by $155 billion (1.1%) to $14.30 trillion in the first quarter of 2020.
Americans as a group owe 10% of their disposable income to non-mortgage debts like car loans, credit card accounts and student or personal loans, the Federal Reserve said of 2019 debt.
According to findings from Experian, a consumer and business credit reporting agency, consumer debt has increased nearly $2.3 trillion since the height of the Great Recession in 2009 — growing across almost all debt products to top $14 trillion in 2019. mbj