NY Fed sees credit markets healing

Having paid down some debt, consumers nationwide appeared more willing to use credit and had an easier time getting it in the first three months of the year, federal bankers said Monday.

The Federal Reserve Bank of New York reported that debt from student and auto loans, credit cards and other non-housing obligations fell in the January-March period compared with a year ago. Most noticeably, credit-card balances were off 4.6 percent from 2010.

However, the number of new mortgages increased to $499 billion, a gain of 31 percent from a year earlier. Limits on credit cards also rose for the first time since mid-2008.

Total indebtedness was $11.5 trillion on March 31, an increase of three-tenths of 1 percent since December 2010 but down 8.2 percent from its peak in mid-2008.

"We are beginning to see signs of credit markets healing gradually and evidence of greater willingness of consumers to borrow and banks to lend," said Fed economist Andrew Haughwout.

He and others noted the number of new home foreclosures and new bankruptcies in January-March compared with a year ago were down nearly 18 percent and 13.3 percent, respectively.

Monday's 30-page credit study from the Fed drew scrutiny because economic growth is tied to the ability of consumers and businesses to borrow money. Big-ticket purchases are behind much of the recovery from the recent 18-month recession.

The Fed study is based on a sample of Equifax credit reports from 11 big states including New York, California, Pennsylvania, Texas and Florida.

New York, with a few exceptions, matched the national average for household debt and credit in the January-March period.

Indebtedness was less than $50,000 per person for both the state and nation, nearly unchanged from early 2010. However, student loans, credit cards and home equity loans accounted for a greater percentage of the average New Yorker's obligations. There were fewer auto loans here as well.

The number of credit-card bills and loan payments that were at least 90 days late in the first three months of the year was higher in New York than the national average but new foreclosures and new bankruptcies were far lower.

Area bankers said the Fed study mirrored what they're seeing at their branches.

"Much of what the Federal Reserve cites in terms of a stabilized credit market is in line with our own research," said Steve Schooff, a spokesman for Capital One Bank, which has extensive operations on Long Island. "Our New York customers have seen their personal savings rates level off in the first quarter of 2011, and the percentage of New Yorkers that have seen their financial situation deteriorate has dropped as well."

He added, "We're seeing our customers become more confident in the state of the economy, and they are beginning to take advantage of opportunities in the market."