February 28, 2013
Wilbert van der Klaauw
Household Debt and Credit: 2012 in Review
The views presented here are those of the author and do not necessarily reflect those of the Federal Reserve Bank of New York, or the Federal Reserve System
2
We regularly provide updates on the current status of consumer debt in our Quarterly Report on Household Debt and Credit.
Today I will discuss the new 4Q 2012 release and review 2012 developments
The findings discussed here are based on the FRBNY Consumer Credit Panel –a unique dataset constructed by the New York Fed based on a 5% representative sample of Equifax consumer credit reports
The Fed and Consumer Debt Reporting
for internal use only
Aggregate Household Debt
3
4
Total Debt Balance Up Slightly in Q4, by $31 billion
Source: FRBNY Consumer Credit Panel/Equifax
0
3
6
9
12
15
0
3
6
9
12
15Housing Non-housing
Trillions of Dollars Trillions of Dollars
Balance now at $11.3 trillion -- $1.3 trillion below 3Q 2008 peak and $200 billion below 4Q 2011 level
5
Housing debt, by far the largest component of household debt, was roughly flat in the 4th quarter at $8.6 trillion. Mortgages were up slightly, due to increased originations Home Equity Line of Credit (HELOC) balances decreased by
$10B in part due to higher charge-offs of delinquent debt from credit reports in 3rd quarter
Non-housing debt up $36B in 4th quarter, continuing recent upward trend, boosted by increases in student and auto loan balances student loan balances up $92B (11%) during 2012 auto loan balances up $50B (7%) during 2012 credit card balances decreased by $25B (4%) in 2012
Factors Behind Change in Total Debt Balance
6
0
1
2
3
0
1
2
3Auto Loan Credit Card Other Student Loan
Trillions of Dollars Trillions of Dollars
Non-housing Balances Up, Largely Driven by Student Loans
Increased by approximately $100B over 2012. Aggregate balance at new high of $2.75 trillion
Source: FRBNY Consumer Credit Panel/Equifax
7
Behind the Aggregate Trends: Mortgage and Auto Loan Originations Increasing
Steady growth during 2012. Auto loan originations back to 2007 levels
0
50
100
150Billions of Dollars
0
200
400
600
800
1,000
Billions of DollarsAuto loanMortgage
Source: FRBNY Consumer Credit Panel/Equifax
for internal use only
Debt Delinquencies
8
9
Overall Debt Delinquency Rates Continue to Fall, but Remain Well Above Pre-crisis Levels
Source: FRBNY Consumer Credit Panel/Equifax
Reflects (i) continued charge-offs of delinquent debt(ii) lower transition rates into delinquency(iii) increase in new originations
75
80
85
90
95
100
75
80
85
90
95
100
04:Q1 05:Q1 06:Q1 07:Q1 08:Q1 09:Q1 10:Q1 11:Q1 12:Q1
Current 30 days late 60 days late90 days late 120+ days late Severely Derogatory PercentPercent
10
Improvements in Most Delinquency Rates Percent of balance 90+ days delinquent
0
5
10
15
0
5
10
15
04:Q1 05:Q1 06:Q1 07:Q1 08:Q1 09:Q1 10:Q1 11:Q1 12:Q1
Credit Card
Mortgage
Auto Loan
HELOC
Percent Percent
Student Loan
Source: FRBNY Consumer Credit Panel/Equifax
• During 2012 continued declines in delinquency rates for mortgages, auto and credit card loans. • Trend for student loans remains upward.
11
Quarterly Transition Rates for Current Mortgages
Mortgage transition rates into delinquencies are approaching pre-crisis levels
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
04:Q1 05:Q1 06:Q1 07:Q1 08:Q1 09:Q1 10:Q1 11:Q1 12:Q1
To delinquent
Percent Percent
Source: FRBNY Consumer Credit Panel/Equifax
12
Quarterly Transition Rates for 30-60 Day Late Mortgages
0
10
20
30
40
50
60
0
10
20
30
40
50
60
04:Q1 05:Q1 06:Q1 07:Q1 08:Q1 09:Q1 10:Q1 11:Q1 12:Q1
To Current(“cure rate”)
To 90+ days late
Percent Percent
Source: FRBNY Consumer Credit Panel/Equifax
Cure rates higher than 2009 trough levels, but remain below pre-crisis levels
13
Foreclosure “pipeline” still large but shrinking 90+ days delinquent mortgage balance
Source: FRBNY Consumer Credit Panel/Equifax
0
100
200
300
400
500
600
700
800
0
100
200
300
400
500
600
700
800
04:Q4 05:Q4 06:Q4 07:Q4 08:Q4 09:Q4 10:Q4 11:Q4 12:Q4
90+ days delinquent balance
new 90+ days delinquent balance
Billions of Dollars Billions of Dollars
14
Reflected in declining bankruptcies and foreclosuresConsumers with New Bankruptcies and Foreclosures
Bankruptcies
0
300
600
900
Thousands
0
100
200
300
400
500
Thousands Foreclosures
2005 bankruptcy reform
Source: FRBNY Consumer Credit Panel/Equifax
15
The overall picture points to continued signs of healing in consumer credit markets
On the positive side, delinquencies on mortgages and auto loans continue to fall, and mortgage and auto loan originations are increasing. With mortgages being the main driver of household debt this
suggests a possible end to the post-2008 decline in overall debt – need to see if trend is sustained over next few quarters
On the negative side, delinquency rates remain high by historical standards. As more HELOCs reach end-of-draw period, delinquency rate
likely to resume upward trend Student loan delinquency rates continue to increase
Summary and outlook
