Consumers Delinquent On $1.3 Trillion Of Debt

August 23, 2010 – Banks nationwide have seen a staggering increase in delinquencies and nonperforming loans as the result of a severe economic recession and housing collapse.  Although delinquency rates and defaults are still at horrendous levels, the Federal Reserve Bank of New York’s quarterly report on household debt and credit offers hope that defaults may have peaked.  According to the Fed report, household delinquency rates have declined in the second quarter of 2010 for the first time since early 2006.

Despite the improved delinquency rate, statistics in the Fed report indicate that the national debt crisis is far from being resolved and consumers are still carrying enormous amounts of debt.

  • Total consumer debt declined for the seventh consecutive month to $11.7 trillion, a reduction of $812 billion (6.5%) from the peak at 9/30/2008.
  • Mortgage debt declined by 6.4% from the peak in 2008 to $9.4 trillion.
  • Consumer debt excluding mortgages has fallen 8.4% from the 2008 peak and now stands at $2.3 trillion.
Total Debt By Composition

Total Debt By Composition

Delinquencies are still a major problem that will take years to resolve.

  • At June 30, a stunning 11.4% of outstanding debt was in some stage of delinquency compared to 11.9% at March 31.
  • There is currently $1.3 trillion of consumer debt that is delinquent of which $986 billion is seriously delinquent, at least 90 days past due.  Although delinquent balances are down 2.9%, serious delinquencies are up 3.1%.
  • In the quarter ending June 30th, 496,000 foreclosures were initiated, an 8.7% increase from the first quarter.
  • Bankruptcies increased 34% during the quarter to 621,000 from 463,000.

The Fed report dryly notes that mortgage delinquency rates remain at “very unfavorable levels by pre-crisis standards”.

New Delinquent Balances

New Delinquent Balances

New Foreclosures and Bankruptcies

New Foreclosures and Bankruptcies

The Fed report notes that approximately 272 million credit accounts were closed and 161 million accounts opened over the past year.  The vast majority of the reduction in credit was in the credit card category as lenders canceled accounts due to defaults and less lenient credit standards.  The number of credit card accounts has declined by 23.2% from the 2008 peak.

Accounts By Loan Type

Accounts By Loan Type

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