Mortgage Defaults On the Rise Again

Mortgage defaults turned upward in the last quarter of 2012, a disturbing trend amid what has been a generally improving housing market.

Defaults have increased for three consecutive months after hitting a post-recession low in September, according to the latest Standard & Poor’s/Experian Consumer Credit Indices, released today. From a figure of 1.36 percent in September, defaults on first mortgages steadily rose throughout the fall, to 1.47 percent in October, 1.58 percent in November and 1.68 percent in December.

The increase in mortgage defaults boosted the overall rate of consumer credit defaults over the same period, despite steady or declining default rates on auto loans and credit cards. The overall consumer default rate rose to 1.72 percent in December, up from a post-recession low of 1.46 percent in December.

“Overall, 2012 showed improvement in consumer credit quality”, said David Blitzer, Chairman of the S&P Dow Jones Index Committee. “However, fourth quarter consumer default rates reversed some of the recent declines and pushed the composite default rate above its level of last May. The principal culprits were first and second mortgages.”

Blitzer said that default rates on all loan types remain below their levels of one year earlier.

Sharp uptick in Miami

It’s not clear what is driving the increasing rate of mortgage defaults, as other economic trends in housing and employment have generally been improving in recent months. The indices are based on data from only five major metropolitan areas, so the figures may not be indicative of the nation in general.

Sharply worsening trends were seen in three of the five metropolitan areas from November to December, in widely separate parts of the country. Overall consumer defaults jumped in Miami, rising to 3.07 percent in December, up from 2.66 percent the month before.

Defaults in Chicago posted a one month increase to 2.15 percent, up from 1.85 percent previously, while credit default rates in the Los Angeles metropolitan area rose to 1.84 percent, up from 1.60 percent in December.

Relatively small increases were seen in the other two metropolitan areas covered by the indices, with defaults in New York rising to 1.51 percent in December, up from 1.47 percent, while defaults in Dallas rose a single point to 1.26 percent, up from 1.25 percent.

Metropolitan default rates are for all types of credit; default rates for mortgages specifically was not provided for individual cities.

First published on MortgageLoan.com at: http://www.mortgageloan.com/mortgage-defaults-rise-again-9339