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Federal Reserve: Mortgage debt rises to 4-year high

Mortgage debt increased by $120 billion in first quarter

Model house on money

The amount of money that Americans owe to mortgage lenders rose to the highest level in more than four years during the first quarter, according to a new report from the Federal Reserve Bank of New York.

The New York Fed’s Quarterly Report on Household Debt and Credit, released Tuesday, showed that the nationwide total of mortgage debt rose by $120 billion from the fourth quarter of 2015 to the first quarter of 2016, to a total of $8.37 trillion.

According to the Fed report, which is based on data from the New York Fed’s Consumer Credit Panel, a nationally representative sample of individual- and household-level debt and credit records drawn from anonymized Equifax credit data, that’s the highest level in four-and-a-half years.

Overall housing debt, which also includes home equity lines of credit, rose to $8.85 trillion in the first quarter, which is the highest that figure has been since the fourth quarter of 2011.

According to the Fed report, the HELOC debt amount actually fell by $2 billion from the fourth quarter of 2015 to the first quarter of 2016, to a total of $485 billion.

Overall, American’s total debt, which includes mortgage debt, HELOCs, student loans, auto loans, and credit cards, increased by $136 billion in the first quarter, to $12.25 trillion.

As the New York Fed notes in its report, the bulk of the total first quarter debt increase came from mortgages – $120 billion of the total $136 billion increase.

Additionally, the Fed report showed that the median credit score for newly originating mortgages increased slightly, and 58% of all new mortgage dollars went to borrowers with credit scores over 760.

The Fed report showed that mortgage originations, which it measures as appearances of new mortgage balances on consumer credit reports and includes refinanced mortgages, were at $389 billion, a slight decrease from the fourth quarter.

On the positive side, roughly 97,000 people had a new foreclosure notation added to their credit reports between January 1 and March 31, which is just above the lowest level seen in the 17-year history of the data, the Fed report showed.

Additionally, the total amount of debt in some stage of delinquency dropped to 5%, which is the lowest amount since the second quarter of 2007.

"Delinquency rates and the overall quality of outstanding debt continue to improve," said Wilbert van der Klaauw, senior vice president at the New York Fed.  "The proportion of overall debt that becomes newly delinquent has been on a steady downward trend and is at its lowest level since our series began in 1999. This improvement is in large part driven by mortgages.”

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