Trend Reversal? Mortgage Default Rates Rise for 4th Month

A national measure of consumer credit defaults – when borrowers stop paying back loans – recorded increases in most loan types for December, and a fourth straight month in first mortgage defaults.
Bank card default rates were the only loan category to decline, from 4.91 percent in November to 4.60 percent in December, according to the S&P/Experian Consumer Credit Default Indices.
Second mortgage default rates increased to 1.33 percent from 1.26 percent; while defaults for auto loans increased to 1.27 percent from 1.17 percent, and first mortgage default rates increased to 2.19 percent from 2.17 percent.
The increases in first and second mortgage and auto loans rates pushed the national composite up from 2.22 percent to 2.24 percent, its highest rate since April 2011.
A jump in mortgage defaults has spurred a slight reversal of a prolonged downward trend in overall consumer credit quality, which had seen defaults decline since the financial crisis of 2008-2009.
“Led by the mortgage markets, the second half of 2011 saw a slight reversal of the two-year downward trend in consumer credit default rates,” says David M. Blitzer, managing director and chairman of the Index Committee for S&P Indices. “First mortgage default rates rose for the fourth consecutive month, as did the composite.”
Since August, first mortgage default rates have risen from 1.92 percent to the 2.19 percent.
The composite also rose during that same period, from 2.04 percent to 2.24 percent.
“The recent weakness seen in home prices is reflected in these data,” Blitzer said. “Bank card default rates, on the other hand, were favorable, falling to 4.6 percent in December. This is more than a full percentage point below the 5.64 percent we saw as recently as July 2011.”
Four out of five major metropolitan areas reviewed by S&P/Experian reported in increases in default rates in December. Miami had the highest percentage increase, from 4.47 percent in November to 4.73 percent in December.
Dallas and Los Angeles increased to 1.56 percent and 2.54 percent in December, from 1.38 percent and 2.53 percent in November, respectively. Chicago remained flat at 2.84 percent. New York was the only area that saw a decrease in default rates, from 2.21 percent in November to 2.13 percent in December.

One thought on “Trend Reversal? Mortgage Default Rates Rise for 4th Month

  • January 18, 2012 at 7:48 pm

    Shall we brace for 2012 also..? This is unfortunate news but no so surprising.

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