QUARTERLY REPORT ON HOUSEHOLD DEBT AND CREDIT

QUARTERLY REPORT ON

HOUSEHOLD DEBT AND CREDIT

2017:Q2 (released August 2017)

FEDERAL RESERVE BANK OF NEW YORK

RESEARCH AND STATISTICS GROUP MICROECONOMIC STUDIES

FRBNY Analysis Based on FRBNY Consumer Credit Panel / Equifax Data

Household Debt and Credit Developments in 2017Q21

Aggregate household debt balances increased in the second quarter of 2017, for the 12th consecutive quarter, and are now $164 billion higher than the previous (2008Q3) peak of $12.68 trillion. As of June 30, 2017, total household indebtedness was $12.84 trillion, a $114 billion (0.9%) increase from the first quarter of 2017. Overall household debt is now 15.1% above the 2013Q2 trough.

Mortgage balances, the largest component of household debt, increased again during the first quarter. Mortgage balances shown on consumer credit reports on June 30 stood at $8.69 trillion, an increase of $64 billion from the first quarter of 2017. Balances on home equity lines of credit (HELOC) were roughly flat, and now stand at $452 billion. Non-housing balances were up in the second quarter. Auto loans grew by $23 billion and credit card balances increased by $20 billion, while student loan balances were roughly flat.

New extensions of credit moderated in the second quarter. Mortgage originations, which we measure as appearances of new mortgage balances on consumer credit reports and which include refinanced mortgages, were at $421 billion, down from $491 billion. There were $148 billion in auto loan originations in the second quarter of 2017, an uptick from the first quarter and about the same as the very high level in the 2nd quarter of 2016. The aggregate credit card limit rose for the 18h consecutive quarter, with a 1.6% increase.

The distribution of the credit scores of newly originating mortgage and auto loan borrowers shifted downward somewhat, as the median score for originating borrowers for auto loans dropped 8 points to 698, and the median origination score for mortgages declined to 754.

Aggregate delinquency rates were flat in the second quarter of 2017. As of June 30, 4.8% of outstanding debt was in some stage of delinquency. Of the $612 billion of debt that is delinquent, $411 billion is seriously delinquent (at least 90 days late or "severely derogatory"). Early delinquency flows deteriorated somewhat in the second quarter from a year ago, although they have improved markedly since the recession. Student loans, auto loans, and mortgages all saw modest increases in their early delinquency flows, while delinquency flows on credit card balances ticked up notably in the second quarter.

About 224,000 consumers had a bankruptcy notation added to their credit reports in 2017Q2, roughly the same as in the second quarter of last year.

Housing Debt There was $421 billion in newly originated mortgages this quarter. Mortgage delinquencies improved, with 1.5% of mortgage balances 90 or more days delinquent in 2017Q2. Delinquency transition rates for current mortgage balances were unchanged, with 1.0% of current balances transitioning to

delinquency. There was an improvement in the transition rate of mortgages in early delinquency, of which 12.8% transitioned to 90+ days delinquent, compared to 18.1% in the previous quarter. About 85,000 individuals had a new foreclosure notation added to their credit reports between April 1 and June 30. Foreclosures remain low by historical standards.

Student Loans, Credit Cards, and Auto Loans Outstanding student loan balances were flat, and stood at $1.34 trillion as of June 30, 2017. The second quarter typically

witnesses slow or no growth in student loan balances due to the academic cycle. 11.2% of aggregate student loan debt was 90+ days delinquent or in default in 2017Q2.2 Auto loan balances increased by $23 billion, continuing their 6-year trend. Auto loan delinquency rates increased slightly, with

3.9% of auto loan balances 90 or more days delinquent on June 30. Credit card balances increased by $20 billion, reversing the $15 billion decline seen in the 1st quarter of 2017.

Credit Inquiries The number of credit inquiries within the past six months ? an indicator of consumer credit demand ? was flat in the second

quarter.

1 This report is based on the New York Fed Consumer Credit Panel, which is constructed from a nationally representative random sample drawn from Equifax credit report data. For details on the data set and the measures reported here, see the data dictionary available at the end of this report. Please contact Joelle Scally with questions at joelle.scally@ny.. 2 As explained in a 2012 report, delinquency rates for student loans are likely to understate effective delinquency rates because about half of these loans are currently in deferment, in grace periods or in forbearance and therefore temporarily not in the repayment cycle. This implies that among loans in the repayment cycle delinquency rates are roughly twice as high.

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