August, 2013 – The Federal Reserve Bank of New York, Research and Statistics Group, Micro-economic Studies, just issued their Quarterly Report.  The report includes housing debt, student loan debt, credit cards and consumer credit demand, plus auto loans.

The good news is defaults of mortgages, auto loans and credit cards appear to be on the decline. The bad news is that student loan defaults are increasing.

FEDERAL RESERVE REPORT:

Housing Debt:

  • Originations, which we measure as appearances of new mortgage balances on consumer credit reports, rose to $589 billion. The level of originations has been increasing since bottoming out in the third quarter of 2011.
  • About 200,000 individuals had a new foreclosure notation added to their credit reports between April 1 and June 30
  • Although this is the first increase seen since 2012Q1, foreclosures are 65 % below the peak of 566,000 new foreclosures in the second quarter of 2009.
  • Mortgage delinquency rates continued to improve in 2013 Q2, with 4.9% of mortgage balances 90+ days delinquent, compared to 5.4% in the previous quarter.
  • Delinquency rates on Home Equity Lines of Credit dropped again and now stand at 3.0%, down from 3.2% in 2013Q1.

Student Loans

  • Outstanding student loan balances increased to $994 billion as of June 30, 2013, a $8 billion uptick from the first quarter
  • The 90+ day delinquency rate improved, and is now at 10.9%, down from 11.2% in the previous quarter.

Credit Cards and Consumer Credit Demand

  • Balances on credit cards accounts increased by $8 billion.
  • The 90+ day delinquency rate on credit card balances fell to 10.0%.
  • The number of credit inquiries within six months–an indicator of consumer credit demand–were roughly flat.  There were 159 million inquiries in 2013 Q2, compared to 158 million inquiries in 2013 Q1.

Auto Loans

  • Auto loan originations increased in the second quarter of 2013 to $92 billion, the highest level since 2007 Q3
  • The percentage of auto loan debt that is 90 or more days delinquent continued its downward trend, and now stands at 3.6%

The good news is defaults of mortgages, auto loans and credit cards appear to be on the decline.  The bad news is that student loan defaults are increasing.  We are calling student loan debt the next “bubble” which will most certainly burst.  This bubble could be as disastrous as the housing bubble.  See page 11 of the report for a graph comparing these four debts.

What can you do?  Help those who need student loans that they need to seek other options first.  They should always look for scholarships or grants before thinking about taking out a loan.  There are hundreds of grants and scholarships which go unfunded every year because no one applies.  See the collage counselor for more information.  If they have exhausted the scholarship or grant route, then try getting a part time job.  I know this is burdensome, but having done it myself, it can be done.  Lastly, take out a loan, but only for the necessary amount.

We have several videos on our web site.  Below is one that might be of interest:

  • “Meet Ms. Drain and Suggestions on How to Hire an Attorney”

I have said this before and will say it again – student loan money is not free money.  I have seen hundreds of clients who are suffering because they cannot pay their student loans.  Some were mislead about the availability of jobs.  Usually this was part of a sales program to entice students to the school.  In my heart and soul that was fraud and the school should be held responsible.  As a result of students loans the graduates cannot finance a house or car because they are carrying too much debt.  This is not the way to start a life.

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