The New American Dream: Dying In Debt

Submitted by gjohnsit on Tue, 03/28/2017 - 1:45pm

I found this statistic stunning.

73% of consumers had outstanding debt when they were reported as dead, according to December 2016 data provided to Credit.com by credit bureau Experian. Those consumers carried an average total balance of $61,554, including mortgage debt. Without home loans, the average balance was $12,875.

I would have thought that living some part of your life without the burden of debt would be an objective.
The values of the Great Depression generation are long dead and buried, I guess.

Note to writers of this article, they are no longer "consumers" if they are dead. They are just "people".

Among the 73% of consumers who had debt when they died, about 68% had credit card balances. The next most common kind of debt was mortgage debt (37%), followed by auto loans (25%), personal loans (12%) and student loans (6%).
These were the average unpaid balances: credit cards, $4,531; auto loans, $17,111; personal loans, $14,793; and student loans, $25,391.
That’s a lot of debt, and it doesn’t just disappear when someone dies.

Normally dying in debt means the creditors come for the house.
Note those types of debt when you consider this article.

Total household debt climbed to $12.58 trillion at the end of 2016, an increase of $266 billion from the third quarter, according to a report from the Federal Reserve Bank of New York.
For the year, household debt ballooned by $460 billion -- the largest increase in almost a decade.
That means the debt loads of Americans are flirting with 2008 levels, when total consumer debt reached a record high of $12.68 trillion.

Americans have managed to rebuild the Debt Mountain of 2008, but this time the Debt Mountain looks a bit different.

However, growth in non-housing debt -- which includes credit card debt and student and auto loans -- are key factors fueling the rebound in debt.
Student loan debt balances rose by $31 billion in the fourth quarter to a total of $1.31 trillion, according to the report. Auto loans jumped by $22 billion as new auto loan originations for the year climbed to a record high.
Credit card debts rose by $32 billion to hit $779 billion.
At these rates, the New York Fed expects household debt to reach its previous 2008 peak sometime this year.

Student and Auto loans, plus credit cards now account for 25% of that Debt Mountain.

At its current level the average U.S household carrying debt owes a resounding $134,643, most of which originate from mortgages and student loans. One of the primary causes for the enlarged balance is higher cost of living relative to income growth. Median household income increased by 28 percent since 2003 whereas the cost of living climbed 30.2 percent.
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Submitted by gjohnsit on Tue, 03/28/2017 - 1:57pm

what will this do to growth?

Data from the US Federal Reserve shows that the $2 trillion market for commercial and industrial loans peaked in December. The sector has weakened abruptly as lenders tighten credit, especially for non-residential property. Over the last three months it has dropped at a rate of 5.4pc on annual basis, a pace of decline not seen since December 2008.
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Submitted by gjohnsit on Tue, 03/28/2017 - 2:54pm

@gjohnsit
The clock stopped; It's still 2008

At the end of last year, 55 percent of mortgages in active foreclosure were originated between 2004 and 2008. Factor in what’s still in the pipeline and one in ten circa 2006 homeowners will have lost their homes before it is all said and done.
As you can see, after a steady 40-year build, owner-occupied housing has stagnated and sits at the lowest level since 2004. This has sent the homeownership rate crashing to 63.4 percent, the lowest since 1967.

lost_decade_amer_dream.png

But Hillary and the Dems told us that things were never better

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Submitted by karl pearson on Tue, 03/28/2017 - 11:16pm
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@gjohnsit During the general election, I remember Hillary Clinton criticizing Trump because his slogan was MAGA. Clinton said "American is already great."
I'm sure it is great for her and her family, but Clinton has never been able to connect to the "little guy." Trump just cons the "little guy." After the election, some Trump supporters told me they were going to get rich, now that Trump was elected. I wonder if these supporters are buying stocks and driving up the market?

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Submitted by gjohnsit on Tue, 03/28/2017 - 3:59pm

@gjohnsit
link

In a fresh working paper, Greg Buchak and Gregor Matvos of the University of Chicago, Tomasz Piskorski of Columbia Business School and Stanford's Amit Seru calculated that between 2007 and 2015, so-called shadow banks have increased their share of the U.S. Federal Housing Administration mortgage market sevenfold to 75 percent. That's the market where the less creditworthy borrowers get their loans. In the U.S. mortgage market as a whole, shadow banks held a 38 percent share in 2015, compared with 14 percent in 2007.

In other markets, financial organizations that are not subject to bank regulation have flourished, too. According to the Financial Stability Board, the august body that makes recommendations to the global financial system from Basel, Switzerland, "other financial intermediaries" -- the category that includes non-bank lenders but not insurance companies and pension funds -- increased their assets to $80 trillion, or 23 percent of total financial assets, in 2014. Their average growth reached 5.6 percent in 2011 through 2014, while the global banking system's assets stopped growing during that time.
...
The reason shadow banks have largely escaped public scorn, regulatory scrutiny and high capital requirements is that they often came in the guise of high-tech disruptors. Quicken Loans Inc., the third biggest mortgage lender in the U.S. in 2015, does business online and on the phone, and that somehow makes it less interesting to regulators than a bank that does the same through an old-style branch network. Lending Club and other "peer-to-peer" lending firms quickly became conduits for large investors, not "peers," yet they avoided regulation as though they were innovative tech platforms.

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Submitted by detroitmechworks on Tue, 03/28/2017 - 1:59pm
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I'll be damned if I can afford the 10 million for my 3 bedroom dream house.
Hell, I'll be damned if I can afford half a million for a reasonable house in a decent neighborhood.

Can't live in a nice neighborhood on my pension, at least without housing aid...
Used to be that 771 a month would pay a decent mortgage. According to all the calculations, I could afford a 110,000 house. Which translates to maybe a 2 bedroom. MAYBE. Provided of course they're willing to overlook my shitty credit, which was created because I cannot afford to pay more than 771 a month in housing.

Course, the banks don't care and will happily loan me money on a car... to get to a job I can't work because child care and defaulted credit would take up 100% of that, then I'd lose the food stamps and the housing assistance because I would "Make too much money" and would be in a worse situation than I am.

Wonderful little game they have going.

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I do not pretend I know what I do not know.

Submitted by The Voice In th... on Wed, 03/29/2017 - 11:20am

@detroitmechworks

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I've seen lots of changes. What doesn't change is people. Same old hairless apes.

Submitted by Pricknick on Tue, 03/28/2017 - 1:59pm
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I'm not in that boat.
How did I get here? Frugal living. Buying only what was needed. Fixing anything that was broke if possible. Driving cars till they were unfixable. Building my own house. Growing a garden every year and only buying from farm markets or cooperatives. Eating healthy. Getting daily exercise. Not feeling bad about wearing used clothing. Cutting the cable. Not needing to talk to someone on the phone wherever I am. Etc etc.
No. I know not everybody can do it. Many more could though.

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Regardless of the path in life I chose, I realize it's always forward, never straight.

Submitted by gustogirl on Tue, 03/28/2017 - 2:23pm

@Pricknick
on much of the above. But a lot of people don't know how to live frugally. So when their paycheck doesn't cover all their costs that month, it goes on the credit card.

I'm willing to bet that is the biggest factor in the tremendous rise in CC debt. Once again, it's income inequality, which no one seems to be working to remedy.

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Submitted by HenryAWallace on Tue, 03/28/2017 - 2:39pm

@gustogirl

income inequality, other than fiddling some with the minimum wage, almost always a case of much too little and much too late. That is why Hillary finally got comfortable talking about income inequality.

Senator Sanders, however, talked of wealth inequality, which few if any politicians other than Sanders ever mention. Government can do, and has done, lots about wealth inequality. It's been a long time since it has messed with wealth inequality for the benefit of the 90%, though.

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Submitted by detroitmechworks on Tue, 03/28/2017 - 2:41pm
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@gustogirl There's the wonderful "Payday Loans" which do nothing but charge insane interest every single month, but of course you have to roll over the loan because your income didn't go up after that emergency loan took a big chunk of your NEXT paycheck.

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Submitted by apenultimate on Tue, 03/28/2017 - 2:09pm

Yep--we're reaching a new bubble! Watch it pop this year or next!

I never understood the "max out your debt" frame of mind. My father tried to instill this in me when I was younger. Not sure why--maybe because he was doing it?!? I never believed a word of it.

Of course I did have debt. It took me 15 years to pay off my student loans and my credit card debt, which absoutely sucked because it basically kept me poor for that time (or pretty damn close to it--living paycheck to paycheck). But after paying those off, for about 7 years I was completely debt free. Funny thing is that I seem to have better credit than any of the people I know who insist that debt is a great thing.

Now all I have in debt is my mortgage. Not sure if that'll be paid off by the time I die--chances are not, but who knows! Of course, you can almost always sell a house and pay off the loan you owe, so in some ways I'm not really in debt.

Finally, I do indeed realize that the predatory economic practices of the last 30+ years have made decent jobs scarce, and has made living without debt almost an impossibility for perhaps a vast majority of people nowadays. That's the real problem. The people have no money, and no way to influence the powers that be.

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Submitted by gjohnsit on Tue, 03/28/2017 - 3:21pm

what could go wrong?

About a third of the risky car loans that are bundled into bonds are considered “deep subprime,” a level that has surged since 2010 and is translating to higher delinquencies on the loans, according to Morgan Stanley.

Consumers are falling behind on most subprime car loans, but deep subprime borrowers have deteriorated fastest, the analysts said. Sixty-day delinquencies for bonds backed by these loans have risen 3 percentage points since 2012, compared with just 0.89 percentage points on all other subprime auto securities, Morgan Stanley’s Vishwanath Tirupattur, James Egan and Jean Ng said in a report dated March 24.

“The securitization market has become more heavily weighted towards issuers that we would consider deep subprime,” the strategists wrote. “Auto loan fundamental performance, especially within ABS pools, continues to deteriorate.”

The percentage of subprime auto-loan securitizations considered deep subprime has risen to 32.5 percent from 5.1 percent since 2010, Morgan Stanley said. The researchers define deep subprime as lenders with consumer credit grades known as FICO scores below 550. The scale from Fair Isaac Corp. ranges from 300 to 850 and while there’s no firm definition of subprime, borrower scores below 600 are in general considered high credit risks.

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Submitted by MrWebster on Tue, 03/28/2017 - 3:48pm

I got a call from a debt collector after an ex-in-law died. I know I didn't co-sign anything, but the person got very pushy about owning part of her debt. Even if you may not be on a joint credit card they may come after you. My ex-brother-in-law took out a credit card only in his name, but when he wouldn't pay, they came after the wife claiming he used credit to buy items for the family and household--have no idea if that is legit, but some debt collectors have no scruples.

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