Returning to economic normalcy apparently means that Americans are back into heavy-debt mode.  Black Knight Financial Services said today that levels of non-mortgage debt at the end of April were at the highest levels in 10 years. 

The company looked at average overall non-mortgage debt of persons who hold a mortgage and at the components of that debt in the current issue of its Mortgage Monitor.  The average debt level of those individuals is just about $24,800, up from $23,400 in April of last year.  Non-mortgage debt hit a recent low in 2011, averaging $22,230, so the newer number is an increase of $2,600 in four years. 



By far the greatest contributor to the increase is auto debt.  It accounts for 81 percent or $2,094 of the $2,600 increase and the share of mortgage holders who have auto debt has risen from 43.4 percent to 48 percent, a 10 percent increase.



Another factor is student loan debt which is at an all-time high.  In 2006 only 10 percent of persons with a mortgage were also carrying student loans; today 15 percent are so burdened.  The average loan balance is $35,000, up about 56 percent from the average of $22,500 over that same time frame.  If the total amount of all student loans is averaged across all persons with a mortgage - even those who are student loan free - the average has more than doubled in nine years.



The third component, credit card debt, averages just under 8,700 across the 83 percent of mortgaged homeowners who have such debt and $7,100 averaged over all people with mortgages.  The credit card debt load has remained fairly stable over the last four years after ratcheting down from a high of $10,300 in 2009.  Black Knight says it appears that borrowers took on additional credit card debt in the recession - perhaps to carry them through unemployment or other financial difficulties - but have since reduced their debt by about $1,600.



Black Knight Data & Analytics Senior Vice President Ben Graboske explained that non-mortgage debt among U.S. mortgage holders bears close watching due to its potential impact on both the lending and housing industries.

Non-mortgage debt is a key component of home affordability. The more total debt and the higher monthly non-mortgage payments borrowers have the less money is available to put towards a new home purchase, the less likely the possibility of refinancing, and the larger the potential for being unable to meet mortgage obligations.  There is a clear correlation between non-mortgage debt, mortgage inquiries, and prepayments, Black Knight said. 

The Mortgage Monitor looked the level of non-mortgage debt by borrowers for loans originated between 2009 and 2014 by investor group. The highest level of overall debt was held by borrowers with FHA and VA mortgages and the lowest for those with loans originated for Fannie Mae and Freddie Mac, the GSEs.  Almost exactly $7,000 separated these loans. The biggest contributor to across FHA and GSE loans as well as originations for portfolio loans and private lenders were auto loans.  By far the largest amount of student debt and lowest level of credit card debt was among FHA/VA borrowers and FHA was responsible for 39 percent of originations for borrowers with credit card debt but only 21 percent for those without it.




"Mortgage lenders know exactly how much debt borrowers are carrying at the point of origination, but often lose sight from that point forward," said Graboske. "Non-mortgage debt is another key piece of the home affordability puzzle -- the more total debt borrowers are carrying and the higher monthly non-mortgage payments they have, the less money they have to put toward a new home purchase, or potentially even their current mortgage obligations.

We also noticed a clear correlation between non-mortgage debt and borrowers inquiring about a new mortgage, with those who have recent mortgage inquiries on their credit reports carrying nearly 40 percent more debt than borrowers who do not," Graboske said.

That 40 percent translates to nearly $10,000 more for those borrowers with a recent mortgage inquiry than those without one and those with a recent inquiry who paid their loan in full during the month of observation (probably an indication of refinancing) had $4,000 less in debt that those who did not pay in full.