Mortgage Default Rates Fall Even Further

June 25, 2012 (Jeff Alan)

Default rates on first and second mortgages declined for a fifth consecutive month in May, helping to push the S&P/Experian Consumer Credit Default Indices national composite down 13.0 percent from 1.86 percent in April to 1.62 percent in May.

First mortgage default rates fell from 1.76 percent in April to 1.50 percent in May. It was the fifth consecutive month that first mortgage default rates have declined. Default rates on second mortgages also declined last month, falling from 0.93 percent in April to 0.88 percent in May.

Mortgage default rates have been steadily declining since 2009 when second mortgage default rates peaked at 4.66 percent in May 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 2.09 percent, and for second mortgages, the default rate was 1.42 percent.

Default rates on bank cards also declined, falling from 4.49 percent in April to 4.35 percent in May, while default rates on auto loans also declined from last month, falling from 1.07 percent in April to 1.03 percent in May.

David M. Blitzer, Managing Director and Chairman of the Index Committee for S&P Indices, stated, “May 2012 data show continued improvements in consumer credit quality. Consumer default rates continue to fall and we are reaching new lows across all the loan types. In the last recession, default rates peaked in the spring of 2009, since then the decline has been bumpy but consistent. Only bank cards remain above their pre-recession lows.”

All five of the Metropolitan Statistical Areas (MSAs) saw default rates decline in the monthly Indices with Miami posting the largest decline in default rates for the third consecutive month, falling 0.59 percentage points to 2.55 percent in May from 3.14 percent in April. In May 2011, the default rate in Miami was 5.31 percent.

Chicago posted the second largest decline, falling 0.36 percentage points to 1.85 percent in May from 2.21 percent in April. A year ago the default rate in Chicago was 2.37 percent.

The default rate in Dallas declined by 0.31 percentage points to 0.95 percent in May from 1.25 percent in April and was also down from a year earlier when the default rate stood at 1.59 percent.

The New York area saw its default rates shrink by 0.17 percentage points in May, falling from 1.78 percent to 1.61 percent. A year ago the default rate in New York was 1.94 percent.

The smallest decline in default rates was recorded in Los Angeles, which fell 0.06 percentage points to 1.82 percent from 1.88 percent in April. In May 2011, the default rate in Los Angeles was 2.39 percent.

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

Source:
S&P/Experian