Q2 Outstanding Mortgage Debt Declines, While New Originations Increase

First lien mortgage debt decreased substantially during the second quarter of 2012, bringing overall household indebtedness down by $53 billion compared to the first quarter of 2012.  According to its Quarterly Report on Household Debt and Credit, the Federal Reserve Bank of New York said that first mortgage debt declined from $8.2 trillion in the first quarter to $8.1 trillion in the second.  At the same time, mortgage originations, measured by the appearance of new mortgages on consumer credit reports, rose to $463 billion.
 

Outstanding household debt stood at $11.38 trillion at the end of the second quarter, down 0.5 percent from the end of the first quarter and has decreased $1.3 trillion since its peak in Q3 2008.  First mortgage debt has paralleled that change, dropping from $9.3 trillion at that peak to its current level.

Auto loan debt increased during the quarter by $13 billion to $750 billion and student loan debt was up by $10 billion to $914 billion and the outstanding balances of home equity lines of credit (HELOCs) remained flat at $0.6 trillion.  Credit card balances are at the lowest level in 10 years and are down 22.4 percent since they peaked in Quarter 4, 2008.  Balances now stand at $672 billion. 

Credit inquiries over the past six months, an indicator of credit demand, decreased 2 percent from Quarter 1, the second consecutive quarter they have fallen.

The Fed reported that the serious delinquency rates were mixed.  Mortgages delinquencies exceeding 90 days declined from 6.7 percent in the first quarter to 6.3 percent and credit card delinquencies from 11.3 percent to 10.9 percent.  Auto loan delinquencies were also down to 4.2 percent from 4.6 percent.  Student loan and HELOC delinquencies both increased from quarter to quarter with student loans rising from 8.7 percent to 8.9 percent and HELOCs from 4.2 percent to 4.9 percent.

Foreclosures are down 55 percent from their peak in the second quarter of 2009 and while slightly more than a quarter million individuals had new foreclosure notations added to their credit reports during the quarter, this was 12 percent fewer than in the first quarter and the lowest number since mid-2007.

"The continuing decrease in delinquency rates suggests that consumers are managing their debts better," said Wilbert van Der Klaauw, vice president and economist at the New York Fed.  "As they continue to pay down debt and take advantage of low interest rates, Americans are moving forward with rebalancing their household finances."