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New York Fed Reports Mortgage Delinquency Rates Down in Q2

Low interest rates and better debt management brought mortgage delinquencies down in Q2, the ""Federal Reserve Bank of New York reported"":http://www.newyorkfed.org/research/national_economy/householdcredit/DistrictReport_Q22012.pdf Wednesday.


The New York Fed released its latest Quarterly Report on Household Debt and Credit, revealing that the delinquency rate for mortgages declined from the first quarter to 6.3 percent.

Transition rates for current mortgages were unchanged, with 1.8 percent of current mortgage balances transitioning into delinquency. The rate of transition from early (30-60 days) to serious (90-plus days) delinquency fell to 23.5 percent, contrasted by a slight drop in the rate of delinquent mortgages becoming current (28.5 percent).

The decline in mortgage delinquency helped fuel a drop in overall delinquencies in the second quarter. As of the end of June, 9.0 percent of outstanding debt was in some stage of delinquency, down from 9.3 percent the previous quarter.

Meanwhile, an estimated 256,000 consumers had a foreclosure notation added to their credit reports, 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, VP 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.""

The New York Fed estimated that about $1.02 trillion of outstanding household debt was delinquent at the end of the second quarter, with $765 billion of that considered seriously delinquent. Outstanding household debt has been trending downward since peaking in the Q3 2008.

Mortgage balances on consumer credit reports fell to $8.15 trillion, a 0.5 percent drop from Q1. At the same time, home equity lines of credit (HELOC) balances dropped by 3.7 percent.

These falls appeared to be instrumental in decreasing debt balances-excluding mortgages and HELOCS, household debt balances actually increased 0.4 percent in Q2 (led largely by auto and student loans).