from the NY FED ...
(snip)The Federal Reserve Bank of New York today announced the release of a new Quarterly Report on Household Debt and Credit and an accompanying web page. The report shows that households steadily reduced aggregate consumer indebtedness over the past seven quarters. In the second quarter of 2010, they owed 6.4 percent less than they did in 2008, the peak year for indebtedness.
Additionally, for the first time since early 2006, the share of total household debt in some stage of delinquency declined, from 11.9 percent to 11.2 percent. However, the number of people with a new bankruptcy noted on their credit reports rose 34 percent during the second quarter, considerably higher than the 20 percent increase typical of the second quarter in recent years."(snip)
(snip)Aggregate consumer debt continued to decline in the second quarter, continuing its trend of the previous six quarters. As of June 30, 2010, total consumer indebtedness was $11.7 trillion, a reduction of $812 billion (6.5%) from its peak level at the close of 2008Q3, and $178 billion (1.5%) below its March 31, 2010 level. Household mortgage indebtedness has declined 6.4%, and home equity lines of credit (HELOCs) have fallen 4.4% since their respective peaks in 2008Q3 and 2009Q1. Excluding mortgage and HELOC balances, consumer indebtedness fell 1.5% in the quarter and, after having fallen for six consecutive quarters, stands at $2.31 trillion, 8.4% below its 2008Q4 peak.
For the first time since early 2006, total household delinquency rates declined in 2010Q2. As of June 30, 11.4% of outstanding debt was in some stage of delinquency, compared to 11.9% on March 31. and 11.2% a year ago. Currently about $1.3 trillion of consumer debt is delinquent and $986 billion is seriously delinquent (at least 90 days late or "severely derogatory"). Delinquent balances are now down 2.9% from a year ago, but serious delinquencies are up 3.1%.(snip)
The 64 trillion dollar question of course is by what mechanism household debt was actually reduced. Taking the headline at face value implies that US households actually paid down their debts. However, debt can also be 'discharged' in other ways ... i.e. via bankruptcy, via 'settlements', via 'short sales' etc.
consider the following chart showing different types of loans ...
The lion's share of US household debt 'reduction' falls into two categories - home mortgages and home equity loans. Auto loans have reduced slightly. However, debt levels attributable to credit cards and student loans continues to increase. Thus the real world interpretation of the headline is that, with the resumption of foreclosures, real estate loan debt is now being 'discharged' at a much faster rate. Arguably, an acceleration of auto repos is also beginning.
Of course, when debt is 'discharged' rather than being paid back in full, somebody winds up the loser. In the case of residential real estate, the major losers are Fannie/ Freddie ( i.e. the US taxpayer ), mortgage bond investors, regional banks and credit unions etc.



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