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» HOUSEHOLD DEBT RECEDES WITH MORTGAGE BALANCES In the first quarter of this year, mortgage originations increased, but total outstanding mortgage debt decreased, according to the Household Debt and Credit Report from the Federal Reserve Bank of New York. Delinquencies also improved over the quarter while foreclosure notices declined, the Fed study found. Total household debt—including mortgages, credit card debt, student loans, and auto loans—declined 1 percent to $11.23 trillion. The two main drivers of the quarterly decline were abating mortgage and credit card debt. Household debt currently stands significantly below its Q 3 2008 peak of $12.68 trillion. Mortgage debt continues to make up a majority of household debt, contributing $7.93 trillion to the nation's total household debt, down from $8.03 trillion in mortgage debt recorded in the fourth quarter of 2012. During that three-month period, mortgage debt remained mostly unchanged from the previous quarter while total debt increased slightly. "After a temporary deceleration in the previous quarter, the data suggest that household deleveraging has resumed its previous trajectory," said Wilbert van der Klaauw, SVP and economist at the New York Federal Reserve. Home equity lines of credit (HELOCs) also declined in the first quarter of 2013. An $11 billion decrease brought the total to $552 billion. Mortgage originations increased for the sixth quarter in a row, reaching $577 billion in Q1. Overall, about 8.1 percent of household debt was delinquent in the first quarter, the Fed reported, down from 8.6 percent in the previous quarter. Mortgage delinquencies declined to 5.4 percent from 5.6 percent in the previous quarter, and HELOC delinquencies declined to 3.2 percent from 3.5 percent. The number of mortgages that fell into delinquent status during the first quarter declined from 1.8 percent in the fourth quarter of last year to 1.6 percent in the first quarter of this year. At the same time, the rate of delinquent mortgages that returned to current status increased from 28 percent to 35 percent. The number of households receiving foreclosure notices declined 12.5 percent over the first quarter of this year with a total of 184,000 new notices doled out during the three-month period. The Federal Reserve Bank of New York obtains its data from Equifax. VISIT US ONLINE @ DSNEWS.COM FDIC INSTITUTIONS SEE RECORD EARNINGS IN Q1, PROBLEM LIST SHRINKS Together, commercial banks and savings institutions insured by the FDIC earned record profits in the first quarter, while the number of "problem" banks continued to decline. According to the FDIC, net income for FDIC-insured institutions reached an all-time high of $40.3 billion in Q1, up by 15.8 percent from last year. The increase marks the 15th straight quarter earnings improved year-over-year. The agency also reported half of the 7.019 insured institutions pulled in higher profits compared to the year before, while 90 percent of institutions recorded positive net income for the quarter. FDIC's list of "problem" banks was reduced for the eighth straight quarter, decreasing to 612. Two years ago, 888 banks were on the list. At the same time, the FDIC saw just four of its institutions collapse in the first quarter, which is the smallest number since the second quarter of 2008 when two institutions failed. So far this year, regulators closed 13 FDICinsured institutions, down significantly from 24 during the same period in 2012. "Today's report shows further progress in the recovery that has been under way in the banking industry for more than three years. We saw improvement in asset quality indicators over the quarter, a continued increase in the number of profitable institutions, and further declines in the number of problem banks and bank failures," said FDIC chairman Martin J. Gruenberg. "However, tighter net interest margins and slow loan growth create an incentive for institutions to reach for yield, which is a matter of ongoing supervisory attention." Meanwhile, noncurrent balances, which stood at $261.2 billion in Q1, shrank to the lowest level since 2008. According to the FDIC, the amount of loans and leases that were 90 days or more past due dropped by $15.7 billion, or 5.7 percent, in Q1. Residential loans drove the decrease, with noncurrent balances in that category falling by $8.7 billion, or 5 percent. Overall, loan losses in the first quarter totaled $16 billion, the smallest quarterly total since Q 3 2007, the FDIC reported. Residential loans saw the greatest improvement in chargeoff levels, which fell by $2 billion, or 39.1 percent, compared to a year ago, while charge-offs for home equity lines fell by $976 million, or 33.4 percent. Loan balances experienced a seasonal decline, falling by $36.8 billion, or 0.5 percent. The agency says the decline was partly due to a $35.9 billion drop in credit card balances. Furthermore, home equity lines were down $16 billion, and residential loans fell by $18.3 billion, or 1 percent. However, multifamily residential real estate loans rose $2.7 billion, or 1.2 percent. STAT INSIGHT 2.5 Trillion Increase in household real estate wealth in the five quarters ended in Q1 2013. Source: Federal Reserve Flow of Funds Report 39

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