Mortgage Loan Defaults Decline in January

February 21, 2011 (Jeff Alan)
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Standard & Poor’s and Experian released their S&P/Experian Consumer Credit Default Indices, a comprehensive measure of changes in consumer credit defaults, showed a decline in monthly default rates across all credit lines. First mortgage defaults fell to 2.84% and second mortgages, with a monthly decline of over 13%, fell to 1.51% for the month of January, 2011.

“We continue to see improvements in consumers’ financial condition. Default rates fell sharply in all major categories and across the five high-lighted cities. Reflecting the better shape of the consumer, the Federal Reserve reported the first increase in bank card credit outstanding in December 2010 since 2008 while other reports show gains in consumer spending,” says David M. Blitzer, Managing Director and Chairman of the S&P Index Committee. “Two keys to the economic recovery are rebuilding balance sheets and increased spending. The reduced default rates seen here demonstrate that house hold balance sheets are being put back into shape and should support gains in spending.”

Credit card and auto loan default rates showed significant declines, with the former down 8.79 percent from December’s level and auto loan defaults down 6.58 percent for the month. Overall, 6.13 percent of all credit card accounts are presently in default, compared to 1.57 percent of auto loans.

Consumer credit defaults varied across major cities and regions of the U.S. Among the five major Metropolitan Statistical Areas reported each month in this release, Los Angeles and New York experienced a decrease in defaults this month to 2.75% and 2.64% respectively. Chicago followed the trend with a default rate of 2.74%. Dallas had the smallest decrease in default rates to 2.06%. Miami had the biggest decline of 36% to a 6.46% default rate.

 S&P/Experian Consumer Credit Default Indices

National Indices

Index January Index Level Change from December 2010 Change from January 2010
Composite 2.89 -3.68% -36.64%
First Mortgage 2.84 -2.64% -37.13%
Second Mortgage 1.51 -13.26% -54.16%
Bank Card 6.13 -8.79% -25.33%
Auto Loans 1.57 -6.58% -38.67%

Source: S&P/Experian Consumer Credit Default Indices
Data Through: January 2011

Tags: standard & poor, experian, consumer credit defaults, first lien mortgage defaults, second mortgage, default rates