Consumer Debt Continues to Fall with Mortgages Leading the Way

11/28/2012 By: Krista Franks Brock 

Consumer debt declined in the third quarter, largely due to decreasing mortgage debt throughout the nation, according to the latest Quarterly Report on Household Debt and Credit released by the Federal Reserve Bank of New York.

After decreasing by $74 billion in the third quarter, consumer debt now stands at about $11.31 trillion. This is 0.7 percent below last quarter and continues a downward trend of almost four years.
Mortgage balances make up the bulk of household debt but are on the decline as well. After a 1.5 percent decline over the third quarter, Americans hold $8.03 trillion in mortgage debt.

Home equity lines of credit also declined, falling by $16 billion or 2.7 percent over the quarter.
While mortgage debt is declining, other categories of debt rose 2.3 percent over the same quarter.
Mortgage delinquencies, however, are also declining, and foreclosures are slowing.
In the third quarter, 5.9 percent of mortgages were 90 or more days delinquent, down from 6.3 percent in the second quarter.
Delinquency rates for home equity lines of credit did not improve over the quarter, but neither did they decline. They remained constant at about 4.9 percent.
Foreclosures slowed by about 5.5 percent over the third quarter with about 242,000 new foreclosures showing up on credit reports during the three-month period.
At the same time, originations rose to $521 billion, according to the Fed.
The improvement in mortgage delinquencies is consistent with the broader trend of improving debt delinquencies overall, which declined from 9 percent in the second quarter to 8.9 percent in the third.