The evolution of arrears among US households 1995-2013

This paper looks at arrears among US households between 1995 and 2013. It uses household data from the Survey of Consumer Finances (SCF) where arrears occur when a household reports it 'sometimes got behind or missed a payment'. The key contribution is that it decomposes the change in arrears into a behavioural part and a compositional part. Older poorer households increased arrears between 1995 and 2001 (this reversed in 2004). Younger middle-income households increased arrears in 2004. Following bankruptcy reform, wealthier households under 50 reduced their arrears between 2004 and 2007. During the sub-prime recession, everyone except younger low income households increased their arrears. The decomposition exercise shows that most of the changes over time are attributed to changes in arrears once the loan is given and not to the change in the composition of the pool of borrowers.