Note: Subprime are those with an Equifax Risk Score below 620; near prime are from 620 to 719; prime are greater than 719. Scores are measured contemporaneously. The data are converted to constant 2020 dollars using the consumer price index.
Source: Federal Reserve Bank of New York Consumer Credit Panel/Equifax; Bureau of Labor Statistics, consumer price index via Haver Analytics.
The share of mortgages either delinquent or in loss mitigation remains well above normal
Mortgage debt accounts for roughly two-thirds of total household credit, with mortgage extensions skewed toward prime borrowers in recent years (figure 2-10). Widespread loss-mitigation measures have helped reduce the effect of the pandemic on mortgage delinquencies (figure 2-11). 9 The share of mortgages that are either delinquent or in loss mitigation was 5.8 percent in , down from its recent peak of 8.9 percent in . 10 Since the s have been extended through at least the summer of this year, providing additional support to households.
2-10. Estimates of New Mortgage Volumes to Households
Note: Year?over?year change in balances for the second quarter of each year among those households whose balance increased over this window. Subprime are those with an Equifax Risk Score below 620; near prime are from 620 to 719; prime are greater than 719. Scores were measured one year ago. The data are converted to constant 2020 dollars using the consumer price index. Key identifies bars in order from left to right.
Source: Federal Reserve Bank of New York Consumer Credit Panel/Equifax; https://www.yourloansllc.com/bad-credit-loans-ri/ Bureau of Labor Statistics, consumer price index via Haver Analytics.
2-11. Mortgage Loss Mitigation and Delinquency
Note: Loss mitigation includes tradelines that have a narrative code of forbearance, natural disaster, payment deferral (including partial), loan modification (including federal government plans), or loans with no scheduled payment and a nonzero balance. Delinquent includes loans reported to the credit bureau at least 30 days past due. The line break represents the data transitioning from quarterly to monthly beginning .
Borrowers still in mortgage forbearance may be more vulnerable to the end of government support as well as to adverse shocks. Survey evidence suggests that these borrowers are more likely to be employed in industries hard hit by the pandemic, to have suffered income losses in the past year, and to be delinquent or in forbearance on other forms of debt. Even so, a large fraction of borrowers have already exited forbearance-in general, these borrowers have loans that are either current or paid off.
At the same time, the significant growth in house prices over the past year, noted earlier in this report, has contributed to the very low estimated share of outstanding mortgages with negative equity (figure 2-12). The ratio of outstanding mortgage debt to home values at the end of last year remains at a modest level (figure 2-13).
2-12. Estimates of Mortgages with Negative Equity
Note: Estimated share of mortgages with negative equity according to CoreLogic and Zillow. For CoreLogic, the data are monthly. For Zillow, the data are quarterly and, for 2017, are available only for the first and fourth quarters.
2-13. Estimates of Housing Leverage
Note: Housing leverage is estimated as the ratio of the average outstanding mortgage loan balance for owner?occupied homes with a mortgage to (1) current home values using the CoreLogic national house price index and (2) model?implied house prices estimated by a staff model based on rents, interest rates, and a time trend.
Consumer credit edged down
Most of the remaining one-third of total debt owed by households is consumer credit, which consists mainly of student loans, auto loans, and credit card debt (figure 2-14). Table 2 shows that consumer credit edged down in 2020 and currently stands at a little more than $4 trillion. Auto loan balances expanded moderately, on net, over 2020, driven entirely by borrowers with prime and near-prime credit scores (figure 2-15).