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Vanishing mortgage debt

By Judy Martel · Bankrate.com
Thursday, September 6, 2012
Posted: 6 am ET

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.

Are you carrying less mortgage debt than you were a few years ago?

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2 Comments
Shawn Brown
September 06, 2012 at 12:06 pm

As a 17 year mortgage professional I can appreciate the information. Its such a great time to purchase but people tend panic in hard times and don't want to spend. The opportunity now to purchase on the low end of values really allows people to have a true investment in their homes again. In some areas values may go up 20-30% in the next 5-10 years. This is instant equity when purchasing on the low end of a market like this. Its a great time to help people however, the tricky programs and hoops that have to be jump through make everyone a little scared. If you have any questions I'd be more than willing to help.