We all know that consumers are being hit hard by the economic devastation caused by the coronavirus. With over 30 million people now out of a job since the middle of March it is to be expected that many consumers would not be making their loan payments. But there is very little data in the public domain that provides a window into how bad the situation is today.
Enter dv01. They are now on the third installment of their biweekly report, COVID-19 Performance Report, and in a short time it has become a must read publication. Their second report provided some insight into loan modifications and delinquencies, sharing that 12% of online consumer loans in early April were either delinquent or the borrower had requested a loan modification. This was roughly double the amount from a month earlier.
Their latest report is super interesting because it provides some historical context on loan performance. While the events of the past few weeks are unprecedented in modern history, we can gain some insight by looking at loan performance in areas that have been affected by a major natural disaster such as a hurricane.
Specifically, dv01 looked at Hurricanes Harvey and Irma that impacted Texas and Florida during 2017. We obviously have a complete data set now as to what happened to the personal loans that were outstanding in the affected areas when the hurricanes hit. All the online lenders offered loan modification options to borrowers in the affected areas similar to what we are seeing now on a national scale.
Before we look into that let’s get a clear picture of where we stand today. While dv01 does not share exactly who is contributing to the data here they did tell me that it is “most major online lenders” in the personal loan space.