by Calculated Risk on 11/27/2012 03:00:00 PM

From the NY Fed: Decrease in Overall Debt Balance Continues Despite Rise in Non-Real Estate Debt

In its latest Quarterly Report on Household Debt and Credit, the Federal Reserve Bank of New York announced that in the third quarter, non-real estate household debt jumped 2.3% to $2.7 trillion. The increase was due to a boost in student loans ($42 billion), auto loans ($18 billion) and credit card balances ($2 billion).

During the third quarter of 2012, total consumer indebtedness shrunk $74 billion to $11.31 trillion, a 0.7% decrease from the previous quarter. The reduction in overall debt is attributed to a decrease in mortgage debt ($120 billion) and home equity lines of credit ($16 billion), despite mortgage originations increasing for a fourth consecutive quarter.

“The increase in mortgage originations, auto loans and credit card balances suggests that consumers are slowly gaining confidence in their financial position,” said Donghoon Lee, senior economist at the New York Fed. “As consumers feel more comfortable, they may start to make purchases that were previously delayed.”
emphasis added

Here is the Q3 report: Quarterly Report on Household Debt and Credit

Mortgages, the largest component of household debt, continue to drive the decline in overall indebtedness. Mortgage balances shown on consumer credit reports continued to drop, and now stand at $8.03 trillion, a 1.5% decrease from the level in 2012Q2. Home equity lines of credit (HELOC) balances dropped by $16 billion (2.7%). Non-mortgage household debt balances instead jumped by 2.3% in the third quarter to $2.7 trillion, boosted by increases of $18 billion in auto loans, $42 billion in student loans, and $2 billion in credit card balances.
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About 242,000 individuals had a new foreclosure notation added to their credit reports between June 30 and September 30, a slowdown of 5.5%, continuing the downward trend as foreclosure starts slowly move toward their pre-crisis levels.

Here are two graphs:

Click on graph for larger image.

The first graph shows aggregate consumer debt decreased in Q3. This was mostly due to a decline in mortgage debt.

However student debt is still increasing. From the NY Fed:

Outstanding student loan balances increased to $956 billion as of September 30, 2012, an increase of $42 billion from the previous quarter. However, of the $42 billion, $23 billion is new debt while the remaining $19 billion is attributed to previously defaulted student loans that have been newly updated on credit reports this quarter.

The second graph shows the percent of debt in delinquency. In general, the percent of delinquent debt is declining, but what really stands out is the percent of debt 90+ days delinquent (Yellow, orange and red).

From the NY Fed:

Overall, delinquency rates improved slightly in 2012Q3. As of September 30, 8.9% of outstanding debt was in some stage of delinquency, compared with 9.0% in 2012Q2. About $1.01 trillion of debt is delinquent, with $740 billion seriously delinquent (at least 90 days late or “severely derogatory”).

There are a number of credit graphs at the NY Fed site.