Credit Defaults Increase, Led by Mortgage Markets

Bank cards were the only type ofrnconsumer debt to see a decline in defaults during December according to datarnreleased today by S&P Indices and Experian. rnThe S&P Experian Consumer Credit Default Indices showed increasedrndefaults in both first and second mortgages and in auto loans.  Driven primarily by the increase in mortgagerndefaults, the national composite index rose from 2.22 percent in November torn2.24 percent in December, the highest rate since April of 2011.  In December 2010 the Index stood at 3.01rnpercent.</p

The default rate for second mortgages increasedrnfrom 1.26 percent to 1.33 percent, auto loan defaults rose to 1.27 percent fromrn1.17 percent and first mortgage defaults increased to 2.19 percent from 2.17rnpercent.  The default rate for bank cardsrnhowever dropped from 4.91 percent to 4.60 percent.  All rates have improved from those of onernyear earlier when the default rate for second mortgages was 1.74 percent; firstrnmortgages, 2.93 percent; auto loans, 1.69 percent; and bank cards, 6.73rnpercent.</p

“Led by thernmortgage markets, the second half of 2011 saw a slight reversal of the two-yearrndownward trend in consumer credit default rates,” says David M. Blitzer,rnManaging Director and Chairman of the Index Committee for S&P Indices.rn”First mortgage default rates rose for the fourth consecutive month, as did therncomposite. Since August, first mortgage default rates have risen from 1.92% tornthe 2.19%. The composite also rose those months, from 2.04% to 2.24%.  Thernrecent weakness seen in home prices is reflected in these data.  Bank cardrndefault rates, on the other hand, were favorable, falling to 4.6% in December.rnThis is more than a full percentage point below the 5.64% we saw as recently asrnJuly 2011.</p

S&P Experian data highlightedrnfive Metropolitan Statistical Areas (MSAs). rnThree of the five showed increases in default rates for the month: Miamirnincreased from 4.47 percent to 4.73 percent; Dallas from 1.38 percent to 1.56rnpercent, and Los Angeles to 2.54 percent from 2.53 percent.  Chicago was unchanged at 2.84 percent and NewrnYork decreased from 2.21 percent n November to 2.13 percent in December.  </p

Blitzer saidrnof the MSA data, “Given what we know about the mortgage markets, it is likelyrnthat these cities are seeing this recent weakness because their housing marketsrnhave still not stabilized.”</p

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