What Is the Most Common Form of Debt?
Although credit cards have gotten most of the attention, mortgages actually represent the most common form of debt in U.S. households. With 51 million recorded mortgages, averaging $200,000 per household, it is hardly surprising that Americans feel increasingly worried about keeping pace with their mortgages, especially as home values drop. As a result, the 2010 market ended as it began, with lenders and homeowners continuing to shed themselves of inordinately high levels of debt.
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Consumer Debt Load
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Total U.S. consumer debt stood at $13.5 trillion, according to figures released in March 2010 by the Federal Reserve Board. Mortgages accounted for $10.20 billion of that figure, dwarfing all other forms of consumer debt -- including auto loans, credit cards and student loans, according to an analysis posted by My Budget 360.com. Broken down per household, the total figure amounted to a $43,874 average debt load per person,
Facts And Analysis
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The Federal Reserve figures equaled a 1.7 percent drop from 2009, the first recorded drop since the U.S. government began tracking them in 1945. According to the Wall Street Journal, analysts attributed the drop to continuing mortgage defaults and job losses brought on by the Great Recession. There were 51 million mortgages, representing an average debt of $200,000 per household. However, more than one-third were on homes whose value was worth less than the mortgage, leading many analysts to question if the worst problems had passed.
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Foreclosures
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By mid-2008, the mortgage meltdown's effects were evident nationwide. In July 2008, PBS.org reports that more than 252,000 properties --or 1 in 501 households -- were in some stage of foreclosure. As My Budget 360.com's analysis points out, one in three Americans have no savings, leading to a debt-fueled economic system.
Other Responses
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Some entities have tried aggressive means to tackle the problem. In Cleveland, officials fought to address a foreclosure problem that forced the city to spend $12 million demolishing abandoned homes during 2007 and 2008. When the Federal Reserve showed little inclination to address predatory lending, the City Council passed a resolution against the practice, only to have the legislature nullify it. Officials responded by suing 21 banks it alleged had targeted the city through predatory lending practices.
Overseas Experiences
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Foreclosure has a different meaning in countries such as Spain, whose laws are considered even friendlier to banks than in the U.S. Unlike in the U.S., mortgages are excluded from bankruptcy proceedings. Even then, Spaniards are still held responsible for the entire mortgage amount, penalty interest fees and court costs.
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References
Resources
- Photo Credit consumer girl image by Lev Dolgatshjov from Fotolia.com
