Fewer Americans Pay Down Mortgage Debt

The high level of publicity surrounding the declines in U.S. default rates has indicated that more Americans are focusing on reducing their spending, increasing their savings and paying down their debt. But a recent article in the Wall Street Journal suggests mortgage debt figures may be misinterpreted by consumers.

A reduction in mortgage default rates generally indicates homeowners are meeting their monthly financial obligations, but this is not always the case. Default rates may also be lower if lenders are forced to charge off a number of loans that they have written off as uncollectable.

Citing data from the Federal Reserve Board and the Federal Deposit Insurance Corp., the Journal reports that although mortgage and consumer debt has declined by $610 billion, lenders have written off more than $588 billion in the past two years. This reveals consumers have paid down only $22 billion in debt by managing their money more wisely.

Despite these figures, consumer credit counselors have reported an increase in the number of Americans seeking debt relief services. Financial literacy programs and money management education initiatives have also grown in recent years to help consumers improve their financial situations.