Default Rates on First Mortgages Increase for the First Time since Last Year

October 20, 2011 (Jeff Alan)

Monthly default rates on first mortgages rose for the first time since November 2010 as default rates in three of the four loan types and in four of the five regions increased in September according to the latest S&P/Experian Consumer Credit Default Indices.

Default rates on first mortgages increased from 1.92 percent in August to 1.99 percent in September, while default rates on second mortgages also increased, from 1.27 percent in August to 1.32 percent in September.

Mortgage default rates have been on the decline since March 2009 when second mortgage default rates peaked at 4.66 percent, followed two months later when first mortgage default rates peaked at 5.67 percent in August 2009.

Auto loan default rates were the only loan type to decline in September with rates decreasing slightly to 1.29 percent in September, down from 1.31 percent in August, while bank card default rates increased from 5.26 percent in August to 5.36 percent in September.

“While this is only one month of data, we have not seen so many increases in default rates in about a year or more,” says David M. Blitzer, Managing Director and Chairman of the Index Committee for S&P Indices. “For most of the past three years, consumer credit default rates have been declining across both loan types and regions. September’s report was the first time we saw increases in four of five regions, three of four loan types and the composite, which rose from 2.04% to 2.10%. Given the fragile state of both the economy and consumer confidence, we will have to closely monitor these data over the next few months to determine if September was just a temporary blip or the reversal of the recent trend.”

Four of the five Metropolitan Statistical Areas (MSAs) posted increases in month-over-month consumer default rates, an exact reversal from last month when four out of the five MSAs posted declines.

New York posted the largest default rate increase in the monthly Index, increasing 0.21 percentage points to 2.01 in September, up from 1.80 percent in August, followed by Miami which increased 0.7 percentage points from 4.52 percent in August to 4.59 percent in September and the default rate in Los Angeles increased 0.5 percentage points to 2.12 in September, up from 2.07 percent in August.

Chicago posted the smallest default rate increase, gaining 0.4 percentage points to 2.47 percent in September, up from 2.43 percent in August. Dallas was the only MSA to post a decline in the default rate, falling 0.18 percentage points to 1.33 percent in September, down from 1.51 percent in August.

Tags: S&P, Experian, Consumer Credit Default Indices, mortgage default rates, auto loan default rates, bank card default rates

Source:
Standard and Poor