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Politics & MoneyMortgage

Americans’ mortgage debt increased to $10T in Q4

New mortgage originations totaled $1.2T in the fourth quarter, New York Fed says

Overall household debt increased by $206 billion in the fourth quarter of 2020 to $14.56 trillion, according to the Federal Reserve Bank of New York. The Fed said that increase was primarily driven by a dramatic increase in mortgage originations.

Mortgage debt balances broached the $10 trillion mark in the fourth quarter, increasing by $182 billion from the third quarter to $10.04 trillion at the end of December, the Federal Reserve Bank of New York’s Center for Microeconomic Data said Wednesday.

New mortgage originations, driven by record-low interest rates that propelled refinancings, totaled $1.2 trillion in the fourth quarter, surpassing volumes seen during the historic refinance boom in the third quarter of 2003, the New York Fed said.

“2020 ended with a substantial increase in new extensions of credit, driven by record highs of new mortgages and auto loan originations,” said Wilbert Van Der Klaauw, senior vice president at the New York Fed. “Notably, the overall median mortgage origination credit scores jumped up, reflecting a high share of refinances.”

Delinquency rates also continued to decline in the fourth quarter, attributed to forbearance exits provided by the CARES Act. The share of mortgages that transitioned to early delinquency dropped to 0.4% in the fourth quarter, according to the New York Fed’s data. As of late December, the overall share of outstanding debt that was in some stage of delinquency was 1.6 percentage points lower than the rate observed prior to COVID-19 in the United States. 


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Roughly 121,000 Americans had a bankruptcy notation added to their credit reports in the fourth quarter, a decline from the third quarter and a new series low, the New York Fed reported.

While mortgage activity increased dramatically, credit card balances increased by just $12 billion in the fourth quarter, $108 billion lower than they had been at the end of 2019. That represented the largest year-over-year decline since the Fed began tracking the series in 1999.

Student loan balances and auto debt increased by $9 billion and $14 billion, respectively. Overall, non-housing balances (including credit card, auto loan, student loan, and other debts) increased by $37 billion during the fourth quarter but were lower year over year.

On Wednesday, a number of Democratic U.S. senators, including Elizabeth Warren, D-MA, lobbied President Joe Biden to cancel $50,000 in student debt for those with student loans. Biden has said he is only willing to cancel up to $10,000 per debtor.

The New York Fed also found that the median credit score of refinancers and repeat buyers was just below 800 at the end of 2020, about 60 points higher than that of first-time buyers.

“With a look to the series history, new mortgages are more prime — for even first-time buyers, median credit scores have slowly drifted up since 2002-06, when they hovered in the high 600s,” the New York Fed said in an accompanying report, called Liberty Street Economics.

The New York Fed noted that some 7.2 million mortgages were refinanced in 2020, which, while spectacular, was still less than half the 2003 total of 15 million.

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