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Consumer mortgage debt hits six-year low

11.28.2012

During the third quarter, new mortgage originations totaled $120 billion.

In the wake of the housing market collapse, a number of mortgage lenders implemented stricter qualification standards for borrowers. As a result, the total amount of mortgage debt has declined significantly so far this year.

During the third quarter, new mortgage originations declined by $120 billion, while home equity lines of credit fell by $16 billion, according to a report from the Federal Reserve Bank of New York. This brought the total mortgage volume to $8.03 trillion, which was the lowest total since 2006.

Although fewer consumers took on mortgage debt during the three-month period, borrowing increased on lines of credit for auto and student loans as well as credit cards, the report said.

"The increase in mortgage originations, auto loans and credit card balances suggests that consumers are slowly gaining confidence in their financial position," said Federal Reserve of New York senior economist Donghoon Lee. "As consumers feel more comfortable, they may start to make purchases that were previously delayed."  

A drop in mortgage originations in the third quarter could be a sign that the industry has settled in for the fall and winter months. During this period, seasonal trends often result in fewer real estate transactions.

However, there was a silver lining. By the end of the three-month period, the mortgage delinquency rate dropped to 5.9 percent, down from 6.3 percent, the report said. This could be an indicator that although fewer borrowers are taking on mortgages, those that have home loans are more responsible about staying on top of their payments.

Mortgage activity continues decline in November
Although mortgage rates hovering near all-time lows continues to contribute to nationwide housing affordability, overall home loan activity continued to post declines in the week ending November 23.

During the week, loan application activity fell nearly 1 percent, according to a report from the Mortgage Bankers Association. This was primarily caused by a 2 percent drop in refinancing, which despite the decline, still accounted for 81 percent of applications.

Meanwhile, the Purchase Index increased 3 percent from the previous week, though this was not enough to offset the overall drop in activity, the report said.

A recent dip in fixed mortgage rates was not enough to spur additional activity. According to the industry group, during the week, the average rate for a 30-year FRM with a conforming loan balance of less than $417,500 hit 3.53 percent, down from 3.54 percent. In addition, 3-year fixed-rate mortgage jumbo loans fell to 3.75 percent, from 3.76 percent the previous week.

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