Search Results
Discussion Paper
Younger Borrowers Are Struggling with Credit Card and Auto Loan Payments
Total debt balances grew by $394 billion in the fourth quarter of 2022, the largest nominal quarterly increase in twenty years, according to the latest Quarterly Report on Household Debt and Credit from the New York Fed’s Center for Microeconomic Data. Mortgage balances, the largest form of household debt, drove the increase with a gain of $254 billion, while credit card balances saw a $61 billion increase—the largest observed in the history of our data, which goes back to 1999.
Working Paper
State Mandated Financial Education and the Credit Behavior of Young Adults
In the U.S., a number of states have mandated personal finance classes in public school curricula to address perceived deficiencies in financial decision-making competency. Despite the growth of financial and economic education provided in public schools, little is known about the effect of these programs on the credit behaviors of young adults. Using a panel of credit report data, we examine young adults in three states where personal financial education mandates were implemented in 2007: Georgia, Idaho, and Texas. We compare the credit scores and delinquency rates of young adults in each of ...
Discussion Paper
Mind the Gap in Delinquency Rates
Total household debt balances increased by $192 billion in the second quarter of 2019, boosted primarily by a $162 billion gain in mortgage installment balances, according to the latest Quarterly Report on Household Debt and Credit from the New York Fed’s Center for Microeconomic Data (the mortgage installment balances exclude home equity lines of credit, which are reported separately and have been declining in balance for some time). The new mortgage total of $9.4 trillion is slightly higher than the previous high in mortgage balances from the third quarter of 2008 in nominal terms.
Report
Payment size, negative equity, and mortgage default
Surprisingly little is known about the importance of mortgage payment size for default, as efforts to measure the treatment effect of rate increases or loan modifications are confounded by borrower selection. We study a sample of hybrid adjustable-rate mortgages that have experienced substantial rate reductions over the past years and are largely immune to these selection concerns. We find that payment size has an economically large effect on repayment behavior; for instance, cutting the required payment in half reduces the delinquency hazard by about 55 percent. Importantly, the link between ...
Discussion Paper
Looking at Student Loan Defaults through a Larger Window
Most of our previous discussion about high levels of student loan delinquency and default has used static measures of payment status. But it is also instructive to consider the experience of borrowers over the lifetime of their student loans rather than at a point in time. In this second post in our three-part series on student loans, we use the Consumer Credit Panel (CCP), which is itself based on Equifax credit data, to create cohort default rates (CDRs) that are analogous to those produced by the Department of Education but go beyond their three-year window. We find that default rates ...
Identifying the Most Financially Vulnerable Families
Households with less than two months’ income in liquid assets and those with high debt-to-income ratios face the greatest risk of serious delinquency.
Journal Article
Deja Vu? The Recent Rise in Credit Card Debt Delinquencies
An analysis examines how a recent rise in credit card debt delinquencies compares with a similar trend during the global financial crisis of 2007-09.
Speech
Opening remarks at the Convening on Student Loan Data Conference
Remarks at the Convening on Student Loan Data Conference, Federal Reserve Bank of New York, New York City.
Working Paper
Climate Risk, Insurance Premiums and the Effects on Mortgage and Credit Outcomes
As climate change exacerbates natural disasters, homeowners’ insurance premiums are rising dramatically. We examine the impact of premium increases on borrowers’ mortgage and credit outcomes using new data on home insurance policies for 6.7 million borrowers. We find that higher premiums increase the probability of mortgage delinquency, as well as prepayment (driven mainly by relocation). The results hold using a novel instrumental variable. The delinquency effect is greater for borrowers with higher debt-to-income ratios. Both delinquency and prepayment effects are present in both GSE ...
Working Paper
Do homeowners associations mitigate or aggravate negative spillovers from neighboring homeowner distress?
Experiences reveal that the monitoring costs of the foreclosure crisis may be nontrivial, and smaller governments may have more success at addressing potential negative externalities. One highly localized form of government is a homeowners association (HOA). HOAs could be well-suited for triaging foreclosures, as they may detect delinquencies and looming defaults through direct observation or missed dues. On the other hand, the reliance on dues may leave HOAs particularly vulnerable to members? foreclosure. We examine how property prices respond to homeowner distress and foreclosure within ...