Consumer Debt Rises in Q4, Mortgage Debt Flattens: Fed

Consumer Debt Rises in Q4, Mortgage Debt Flattens: Fed

03/01/2013 BY: ESTHER CHO

Mortgage debt for U.S. households was roughly unchanged quarter-over-quarter, according to the Federal Reserve Bank of New York’s Household Debt and Credit report. Mortgage debt stood at $8.03 trillion in Q4, making up the largest component of household debt.

At the same time, overall consumer debt increased by $31 billion to $11.34 trillion, a slight 0.3 percent increase from the third quarter.

The increase is mostly due to “a rise in non-housing debt and the stabilization of mortgage debt,” the New York Fed stated. Non-housing debt increased 1.3 percent to $2.75 trillion. The rise in consumer debt also breaks a downward trend that first began in Q4 2008, according to the report.

Despite the growth, the report noted consumer debt has still seen a significant decline after peaking at $12.68 trillion.

“Since the third quarter of 2008, its peak, household debt has fallen by $1.3 trillion-about 10 percent-mostly because of declining mortgage balances,” said James McAndrews, EVP and director of research at the New York Fed, in a speech.

In Q3 2012, mortgage debt saw a decrease of $120 billion, representing a 1.5 percent decline from Q2.

While mortgage debt was mostly flat, home equity lines of credit (HELOC) saw a significant decline, falling by $10 billion, or 1.7 percent, to $563 billion.

Fourth quarter delinquency rates for HELOCS fell to 3.5 percent, a decrease from 4.9 percent in the previous quarter.

According to the report, the decline can largely be attributed to “high charge-offs of delinquent HELOCS.”

A smaller percentage of mortgages were in the seriously delinquent category, or 90 days or more past due, after falling to 5.6 percent in Q4, down from 5.9 percent in Q3.

Fewer individuals also had foreclosure notations added to their reports. During the last quarter of the year, the total was about 210,000 individuals, representing a 13.3 percent decrease.

New mortgage balances in Q4 also increased, according to the report, with originations growing to $553 billion, The Fed report says the level of originations has been on the rise after bottoming out in Q3 2011.

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