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Total consumer debt fell about $60 billion to $11.66 trillion in the third quarter, according to the Federal Reserve Bank of New York's quarterly report on household debt and credit. The third-quarter data represents approximately a 0.6% decline from revised second-quarter findings of $11.72 trillion.

Mortgage balances on consumer credit reports dropped roughly $114 billion, or 1.3%, during the third quarter, while balances for home equity lines of credit increased by $14 billion, or 2.3%. Compared to their peak levels, mortgage and HELOC indebtedness have fallen 9.6% and 10.5%, respectively.

"The decline in outstanding consumer debt reveals that households continue to try and deleverage in the wake of a challenging economic environment and large declines in home values," says Andrew Haughwout, vice president in the research and statistics group at the New York Fed. "However, our findings also provide evidence that consumer credit demand continues to increase - a positive sign for consumer sentiment."

On the distressed-loan front, the New York Fed reports that about 2.5% of current mortgage balances rolled into delinquency in the third quarter, reversing a recent trend of reductions in this measure. New foreclosures, meanwhile, decreased 7% quarter over quarter, and bankruptcies declined 18.8% year over year.

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