[Music]
ever since the financial crisis of a
decade ago we've all been a bit paranoid
about debt and in particular about debt
of the US consumer well here's some good
news
mortgage debt does not seem to be set to
start another set of problems this chart
shows the percentage of US consumer debt
that is over 90 days delinquent the red
line here shows mortgage debt and as you
can see the trend is clearly down
seriously delinquent mortgage debt is
now at about 1% of total mortgage debt
down at pre-crisis levels and clearly
banks and consumers both learned a
lesson in 2008-2009 banks have tightened
underwriting standards buyers are a bit
more cautious and lower interest rates
make mortgages easier to pay now
something to be more worried about as
you can see delinquent auto debt is on a
clear rising trend is approaching the
levels of delinquency we saw in the
financial crisis and is well above
pre-crisis levels a study by the New
York Federal Reserve Bank showed that
the rising delinquency in auto debt is
particularly concentrated among
consumers with low credit scores and
lower income consumers so for one thing
this rising line should make us wonder
whether the US consumer is really as
healthy as she appears and whether the
booming market for securities backed by
auto loans is as stable as it appears
there is however some good news first
auto debt has some characteristics that
make it intrinsically stable
most importantly it is always at the top
of US consumers priority list for debt
payments as the old saying goes you can
sleep in your car but you can't drive
your house to work another important
point there isn't nearly as much auto
debt as there is mortgage debt next in
relative terms there is not that much
auto debt outstanding yes there is 1.3
trillion dollars of car loans
outstanding in the United States but
that's not actually that much compared
to mortgage debt at nine point five
trillion finally and perhaps most
importantly from the point of view of
the crisis a lot of auto debt is not
held at banks the majority is held
either by asset managers or at non-bank
lenders so should this rising trend in
delinquency in car loans in the United
States make us worry about the health of
the US consumer yes should it make us
hesitant as investors to take a lot of
risk in this category perhaps should it
make us worry about the stability of the
financial system almost definitely not