To The Moon

Dungeons & Dragons (2000) - IMDb

Source: IMDb

When we spoke about D&D, some may refer to Dungeons and Dragons. For some, it could be Dinner and Dance.

Personal photo collection (BeerFest Asia)

For this season, it is about Delinquency and Defaults.

Delinquency and defaults are terms that kept popping up in recent news.

News about default

News about Delinquency

The following is the explanation provided by Investopedia about delinquency and default.

What are the differences between delinquency and default?

Delinquency vs. Default

Implications & views of Default and Delinquency (D&D)

• This can happen to debts for the consumer, corporation, and government (state, federal, local, etc).

• While most of the macro data focus on GDP, inflation, interest rate, and unemployment, D&D can also be seen as a leading indicator.

• When D&D occurs, it implies that there are funds and cash flow issues.

• One man’s debt is another man’s asset.

• Yet, it could take months before it shows up as a D&D data point.

• Thus, the data can be late to account for the financial challenges faced by the various debt holders in the US.

• Let us look at the example of a student loan.

This is extracted from the US government agency Consumer Financial Protection Bureau (CFPB) website:

Default is the failure to repay a loan according to the terms agreed to in the promissory note. For most federal student loans, you default if you have not made a payment in more than 270 days.If you haven’t made a payment on your federal student loan for at least 270 days (nine months), and you have not entered into an agreement with your lender or servicer to postpone your payments (like deferment or forbearance), you are probably in default.

The following chart shows that auto loan delinquency (subprime) hit a record 6.11% in September 2023.

• D&D plays a role that escapes revelation in data such as unemployment and GDP growth.

• Thus, it can be helpful if we consider them if we need to be mindful of macro developments.

• If the consumption within the economy is funded without debt, it is a healthy economy. If it is funded by debt, overdraft, or credit facilities, it can be worrisome in such a high-interest-rate environment.

• The impact can spill over into the banking sector and thus, I am monitoring bankruptcy, home foreclosure, and vehicle repo data.

• It is possible that the weaknesses in commercial real estate (CRE) can add to the woes of regional banks. A consolidation of smaller regional banks into the bigger banks are on the cards.

Supplementary notes from Google Gemini:

The timeframe for a loan to be considered delinquent can vary depending on the type of loan and the specific lender. However, here's a general guideline:

Most common:

• Auto loan, mortgage, personal loan: These typically become delinquent 30 days after a missed payment.

• Student loan: These generally become delinquent 90 days after a missed payment.

Less common:

• Commercial mortgage: The delinquency timeframe for commercial mortgages can vary more significantly depending on the lender and the loan agreement. It could range from 30 to 90 days or even longer.

It's crucial to understand that these are just general guidelines, and the specific definition of delinquency can differ based on the following factors:

• Loan agreement: The contract you signed with the lender will explicitly define the grace period for missed payments before the loan becomes delinquent.

• Lender policy: Different lenders might have slightly different internal policies regarding how they handle late payments and classify delinquencies.

Here are some additional points to consider:

• Even if your loan isn't officially delinquent yet, missing a payment can still have negative consequences, such as late fees and damage to your credit score.

• If you're facing difficulty making your loan payments, it's crucial to communicate with your lender as soon as possible. They might be able to offer options like deferment, forbearance, or a modified repayment plan to help you get back on track.

It's always best to refer to your loan agreement or directly contact your lender for the most accurate information regarding the specific delinquency timeframe applicable to your loan.

@TigerStars

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