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Thursday, January 22, 2015

Mortgage Default Rates Increase

http://dsnews.com/news/01-21-2015/indices-report-monthly-increases-mortgage-default-rates

Indices Report Monthly Increases for Mortgage Default Rates

Default rates are on the rise month-over-month for both first and second mortgages nationwide, according to the S&P Dow Jones Indices and S&P/Experian Consumer Credit Default Indices for December 2014 released Wednesday.
According to the data, the first mortgage default rate experienced its biggest monthly increase since September 2013, rising by five basis points from 0.97 percent in November up to 1.02 percent for December. The second mortgage default rate took a leap of 11 basis points, up to 0.59 percent for December.
The national composite default rate, which includes first and second mortgage defaults as well as those on bank cards and auto loans, increased by four basis points up to 1.11 percent from November to December.
"December was the fifth consecutive month with increasing national consumer credit default rates," said David M. Blitzer, Managing Director and Chairman of the Index Committee for S&P Dow Jones Indices. "Increases also occurred in some recent months in mortgages and auto loans. While the economy is strengthening and consumer spending is gaining, wages have shown little growth. The large drop in oil prices benefits consumers’ disposable income and should limit consumers’ financial stress. Default rates remain very low but could be a cause for concern if the rising trend gains strength."
All default indices are down year-over-year, however. The national composite was 24 basis points lower in December than it was for December 2013; the first mortgage default rate declined from 1.27 percent to 1.02 percent year-over-year in December; and the second mortgage default rate fell from 0.76 percent to 0.59 percent for the same period.
Of the five metropolitan statistical areas tracked by the indices (New York, Chicago, Dallas, Los Angeles, and Miami), Miami had the highest default rate for December at 1.34 percent – which was less than half of what was reported for the same month a year earlier (2.74 percent). Miami was the only one of the five areas that reported a month-over-month decline, down 12 basis points from November to December.
"Chicago, Dallas, New York, and Los Angeles reported default rate increases in December. Across these cities, there is a seasonal pattern with December showing larger than typical increases in default rates, probably associated with holiday shopping and delayed payments," Blitzer said. "New York reported the largest increase, up seven basis points from last month’s historic low, to 1.05 percent. Chicago also increased from its historical low in November, up five basis points to 1.16 percent, and Los Angeles increased six basis points to 0.86 percent. Only Miami reported a rate decrease, down 12 basis points to 1.34 percent. Despite the significant increases, all five cities –Chicago, Dallas, Los Angeles, Miami and New York – still remain below rates seen a year ago."

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