FAST FIVE: Morgan Stanley Makes A Stunning Observation: 28% Of The US Population Has FICO Score Below 650
Just a few weeks ago, in a CNBC interview, Fed Vice Chair Clarida said that “I cannot think of a time where in the aggregate the consumer has been in better shape.” With unemployment at 3.5%, the household savings rate ticking up to 8%, the aggregate debt-to-income ratio hovering around 40-year lows and consumer delinquencies at or near post-crisis lows, policy-makers' comfort with the strength of the US consumer seems well grounded.
It's worth noting that, post-crisis, mortgage debt has been highly constrained, producing an upward shift in mortgage credit quality – the current median FICO score of mortgage originations is over 750 versus ~700 pre-crisis.
But the New York Fed's financial obligations ratio tells a different story, as our residential credit strategists have recently demonstrated.
In addition to standard debt payments, the financial obligations ratio includes payments towards rent, auto leases, homeowners' insurance and property tax payments, with rents representing the bulk of these non-standard obligations.
Prime auto delinquencies are at their lows for this time of year since 2014-15, as expected, but non-prime delinquencies are above crisis-era peaks.