TOE

But delinquencies are a flow. Balances are removed from the delinquency basket either when the customer cures the delinquency, such as catching up with past-due payments, or when the bank “charges off” the delinquent balance against its loan loss reserves. But as these delinquent balances were taken out of the delinquency basket, even more new delinquencies fell into the basket, and the delinquency rate rose.

By Wolf Richter, editor of Wolf Street. Originally published at Wolf Street
Automated S/L will have some of this problem, though in a diminished amount. This is the scofflaw queue audit needs to be a stable queue so it may be priced accurately. The best solution is risk equalization, get the risk equalized accounts to manage both deposits and loans together, no third party credit suppliers taking excessive risks.