Home/Mortgages/Mortgage Default Rates Decline in August

September 19, 2012 (Jeff Alan)

Default rates for most consumer loan types fell in August helping to push the S&P/Experian Consumer Credit Default Indices national composite down from 1.51 percent in July to 1.50 percent in August despite an uptick in default rates in three of the five regions surveyed.

First mortgage default rates moved slightly lower last month, falling from 1.41 percent in July to 1.40 percent in August. It was the eighth consecutive month that first mortgage default rates have either declined or remained unchanged from the previous month.

Default rates on second mortgages also declined last month, falling from 0.75 percent in July to 0.72 percent in August. Second mortgage default rates were at their lowest level in over eight years.

Mortgage default rates have been steadily declining since 2009 when second mortgage default rates peaked at 4.66 percent in August of that year, followed several months later by first mortgage defaults which peaked at 5.67 percent in August of the same year.

A year ago, the default rate on first mortgages was 1.92 percent, and for second mortgages, the default rate was 1.27 percent.

Default rates on bank cards also continued to decline, falling from 3.83 percent in July to 3.77 percent in August, while default rates on auto loans were the only category in the Index to see an increase, climbing from 1.01 percent in July to 1.09 percent in August.

David M. Blitzer, Managing Director and Chairman of the Index Committee for S&P Indices, stated, “While there has been a bit of volatility among loan types and cities, the basic trend has not changed. Consumers are continuing to repair their balance sheets, as evidenced by diminishing default rates. For the housing market, there are still a substantial number of loans outstanding that defaulted in the past and that segment of the market is still of concern. But for 2012, the drop in mortgage default rates is a good sign for the housing market and the consumer.”

Only one out of the five Metropolitan Statistical Areas (MSAs) saw their composite default rate decline in the monthly Indices. The composite default rate for Los Angeles fell 0.7 percentage points to 1.60 percent in August from 1.67 percent in July. A year ago the composite default rate in Los Angeles was 2.07 percent.

Three of the MSA’s posted an increase in their composite default rates in August while one, New York, remained unchanged. Miami posted the largest increase in default rates, climbing 0.23 percentage points to 2.62 percent in August from 2.39 percent in July. In August 2011, the default rate in Miami was 4.52 percent.

Dallas experienced the second largest increase in default rates, growing by 0.19 percentage points to 1.07 percent in August compared to 0.98 percent in July. The default rate in Dallas in August of last year was 1.51 percent.

Chicago reported a 0.08 percent gain in its default rate, increasing from 1.84 percent in July to 1.92 percent in August, A year ago, the default rate in Chicago was 2.43 percent.

The default rate in New York remained unchanged at 1.49 percent but was still down from a year ago when the default rate was 1.80 percent.

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