There is good news about Americans and their debt in a quarterly report issued by the
Federal Reserve Bank of New York's Consumer Credit Panel; keeping in mind, of
course, that everything is relative. For
example, aggregate consumer debt and household delinquency rates, while still
in abysmal territory, both declined during the second quarter of 2010.
The report uses
detailed Equifax credit report data to construct a longitudinal quarterly panel
of individuals and households covering the period 1999 to 2009. The panel is a nationally representative 5
percent sample of individuals with social security numbers and an Equifax credit
history. The survey includes all
individuals sharing the panel members' address, allowing the survey designers
to construct household-level debt for a representative sample of US households. The database that results from the survey's
design includes approximately 40 million individuals each quarter. To reduce costs, a further 2 percent sample is
taken for analysis resulting in a final sample of 240,000 individuals.
The study distinguishes
debt across the following types of accounts:
mortgage accounts (including home equity installment loans (HEL)), home
equity revolving accounts (HELOCs), auto loans, credit cards, student loans,
and other loan accounts including consumer finance, retail stores and gas
station accounts.
As of June 30,
American consumers owed $11.7 trillion, down 1.5 percent from the previous
quarter and 6.5 percent below the peak level for consumer debt ($12.5 trillion)
at the end of the third quarter of 2008. This downward trend has now continued for
seven quarters.
Mortgage indebtedness
has declined 6.4 percent since its peak, also in Q3 of 2008. HELOCs were down 4.4 percent since peaking in
late 2008 and early 2009. Consumer indebtedness
exclusive of mortgage and HELOC accounts was down 1.5 percent from the previous
quarter and now totals $2.31 trillion, a decrease of 8.4 percent from the
2008Q3 peak.

On a state-by-state basis,
the highest per capita debt load is in California followed by Nevada, and New
Jersey. Those three states also lead the
nation in the highest mortgage debt loads and highest rate of delinquent
consumer debt.

Approximately 272
million credit accounts were closed over the four quarters ending June 30 and
161 million accounts were opened. Credit
cards have accounted for most of the net reduction in accounts over the past
two years and fell 4 million to 381 million open accounts during the second
quarter. The number of credit card
accounts has dropped steadily since reaching a peak of nearly 500 million open
accounts in mid-2008. The increase in credit
inquiries in the first half of 2010, however, indicates that demand for credit
may be ticking up.

Household delinquencies
declined during the quarter for the first time since early 2006. At the end of the quarter 11.4 percent of
outstanding debt was in some stage of delinquency, down from 11.9 percent at
the end of the first quarter. Currently
about $1.3 trillion of consumer debt is delinquent and $986 billion is at least
90 days in arrears. Delinquent balances
are 2.9 percent lower than one year ago, but serious delinquencies have
increased 3.1 percent.

About 496,000
individuals had a foreclosure notation added to their credit report during the
quarter, up 8.7 percent from Quarter One and about 2.6 percent of mortgages that
were current at the beginning of the quarter were no longer so at the end. Better news was that the number of early
delinquencies that transitioned into serious status improved sharply, from 39
percent to 33 percent and the cure rate - transitions from delinquent to
current - rose to nearly 30 percent.
Both standards, however, remain at what the report termed
"unfavorable levels by pre-crisis standards."

Bankruptcy filings during
the quarter, reached 621,000. This is
the highest rate for filings since the Bankruptcy Reform Act of 2005 went into
effect. The report states that there is
typically an increase in filings between the first and second quarter each year
but usually in the vicinity of 20 percent rather than the 34 percent first-to-second
quarter increase this year.

Mortgage
originations fell 4.1 percent to $364 billion but were still over 20 percent
above the low reached at the end of 2008.
Mortgages are being originated at less than half the average rate in the
2003-2007 period.