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The New York Federal Reserve is out with its latest quarterly report on household debt. For the first time ever, U.S. household debt has topped $14 trillion. That, by the way, was the 22nd consecutive quarter of rising household debt in this country.
One thing the Fed likes to monitor is the number of people in “serious delinquency,” meaning 90 days past due on a bill.
And in this economy — where we’re seeing unemployment at historic lows and the longest expansion in our history continues — two thirds of past-due debt falls under that serious delinquency category.
A lot of people have paid a bill a month late. But Chi Chi Wu at the National Consumer Law Center said to beware of not paying much past that.
“At 30 days, it’s a mistake. It’s an ‘Oops, they were on vacation, they, you know, they misplaced the bill,” Wu said.
At 60 or 90 days, she said, “Someone’s in serious trouble. This is someone who’s lost their job, got sick, they don’t have the funds to pay.”
And it’s hard for people who owe several months worth of loan payments to dig themselves out of this hole.
“A bunch of late fees have piled on the previous month’s payments and so now you’re looking at a much larger payment that you have to make,” Wu said.
The 90-day mark has become a rule of thumb for lenders.
“By the time you get the three-month mark, the chance that I’m going to pay you is almost nil,” said Greg McBride, chief financial analyst at Bankrate.com. “At that point, financial institutions are having to significantly write down the value of that particular asset, that loan.”
The 90-day mark can be a turning point for mortgages, in particular. Joann Needleman, an attorney at Clark Hill, said when people are three months late on their mortgage payments it’s “a triggering kind of benchmark, to start then doing outreach to consumers for possible loan modification.”
It’s also when banks start ramping up their foreclosure threats.
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