There is a strange phenomenon in the way consumers are behaving when they face the loss of income that may result in defaulting on their debt responsibilities. When there is the possibility of falling behind on their mortgage, credit card payment or car loan, borrowers are choosing to let their mortgage slide rather than their other debts, according to a study recently conducted by Equifax. The results of the research run against conventional wisdom, said Myra Hart, a senior vice president at Equifax. “They know they have to make payments on their credit card because they need that and they need their car to get to work. It’s been sort of folklore in the industry that people always pay their mortgage or auto loan first. The people who were delinquent on their mortgages but who paid their credit cards on time tended to have higher credit scores,” Hart said.

Looking at thousands of consumers who had taken out mortgages in 2002 and 2005, the study tracked their payment behavior over a 24-month period. Of those in the 2002 sample who had missed two mortgage payments during the 24-month period, 26% kept up with their credit card payments; 59% made all of their car payments. Moving ahead to 2005, mortgage payments slid down the list of priorities even more. Of those who fell behind on their mortgages, 38% maintainted a spotless credit card payment history and 62% kept up their car payments. Although the mortgage payment should be the first priority, many borrowers may be neglecting it because they think the government will help them keep their homes. The trend was more pronounced in states like Florida and Arizonia, where many people made speculative home investments.

How’s your credit? Be sure to get a copy of your credit report >

Posted in News & Info

You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.