Waccabuc NY

Serious Delinquency Rates Improve Across Most Household Debts | Waccabuc Real Estate

A recent release by the Federal Reserve Bank of New York indicates that, in aggregate, 90 or more day delinquency rates are falling on most household debt products. However, serious delinquency on student loans remains elevated while a greater portion of auto debt held by households with low credit scores is entering serious delinquency. The results indicate that household balance sheets are likely improving on balance but some concerns persist.

As the figure below illustrates, the majority of consumer loan types have seen the share of balances 90 or more days delinquent fall from their cycle peaks. The proportion of credit card debt 90 or more days past due has dropped to 7.1 percent 6.6 percentage points below its peak in 2010, 13.7 percent. The percentage of mortgage debt has dived 7.3 percentage points to 1.6 percent while the portion of 90 or more days late home equity lines of credit has fallen from 4.9 percent to 2.0 percent.

Although credit card debt, mortgages, and home equity lines of credit have trended downward since reaching their cycle peaks, the share of student loan debt 90 or more days delinquent jumped in 2012 to 11.7 percent and has remained near this level in subsequent years.

Interestingly, the 90 or more day delinquency rate on auto debt followed the same pattern as credit card and mortgage debt, declining in the years immediately after reaching its peak. However, since 2014, the proportion of auto loan debt 90 or more days delinquent has held steady. More precisely, the percent of auto loans 90 or more days delinquent has trended up slightly since the middle of 2014.

Additional analysis by the Federal Reserve Bank of New York indicates that, after declines from their cycle peaks, the flow of auto debt into 90 or more day delinquency has been generally flat for households with a 620 and above. However, as shown in the figure below which was reproduced from the blog post linked to above, the flow of auto loans into 90 or more day delinquency has increased noticeably for consumers with a credit score below a 620.

More precisely, the flow of auto debt flowing into 90 or more day delinquency for those with a credit score between 620 and 659 rose a bit in 2014 before returning in 2015. In addition, there has been a very slight upward trend in the flow of auto debt into 90 or more day delinquency by borrowers with a credit score between 660 and 719 and a small uptick over 2016 in the flow for consumers with a score between 720 and 759.