U.S. households are reporting less mortgage debt, as homeowners either lost their home to foreclosure or paid down their loan, according to the Federal Reserve Bank of New York.
Total household debt dropped by 0.5 percent from the first quarter to the second. Many are taking this as yet another sign of a recovering housing market, but it represents both good and bad news. The number of new mortgages has increased, while the number of delinquent borrowers, or those who haven't made a mortgage payment in 90 days, decreased. Foreclosures are down. All of those are positive signs of a recovery.
But part of the reason for the drop in mortgage debt comes from tighter lending standards that are making it more difficult for borrowers to qualify for a loan. A sluggish economy and high unemployment among the young are stalling home purchases.
When Americans pull back from borrowing, they don't spend as much, which slows down economic recovery. But the reduced spending puts borrowers on more-solid footing in preparation for spending in the future without overextending their credit.
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