Composite Default Rates Fall to Four-Month Low
S&P Dow Jones Indices and Experian, New York, said its Consumer Credit Default Indices fell to the lowest level in 2017, despite an increase in bank card default rates for the sixth straight month.
The report said the composite rate dropped four basis points from last month to 0.90%. The first mortgage default rate dropped six basis points from March to 0.69%. Auto loan defaults decreased 10 basis points to 0.90%. The bank card default rate increased four basis points from March to 3.35%.
Four of the five major cities surveyed saw their default rates decrease in April. Chicago experienced the largest decrease, down 11 basis points from March to 0.94%. Dallas and Miami each reported decreases of 10 basis points from the previous month to 0.69% and 1.30%, respectively. Los Angeles fell by six basis points from March to 0.69%. At 1.10%, New York was the only city reporting a default rate increase of one basis point from previous month.
The national bank card default rate of 3.35% in April sets a 46-month high. Among census divisions, the default rate in the South is considerably higher than the other three census divisions. The East South Central Census Region–Kentucky, Tennessee, Alabama and Mississippi–had the highest bank card default rate.
“Default rates on first mortgages are steady as home prices continue to rise in most parts of the country and sales of both new and existing homes increase,” said David Blitzer, managing director and chairman of the S&P Dow Jones Indices Index Committee. “The Fed survey reported little change in either demand for mortgage loans or mortgage lending standards. The level of outstanding mortgage debt bottomed in the second quarter of 2014 and has been increasing steadily since then. After almost three years, outstanding mortgage debt is 9% below the peak seen in the first quarter of 2008.
Blitzer added despite questions if continuing increases in home prices presage a new housing bubble, “given conditions in the mortgage markets, this is not a current concern.”
Earlier this week, the Mortgage Bankers Association reported delinquency rates for mortgage loans fell in the first quarter, while foreclosure actions rose slightly. The MBA First Quarter National Delinquency Survey reported the delinquency rate for mortgage loans on one-to-four-unit residential properties decreased to a seasonally adjusted rate of 4.71 percent of all loans outstanding at the end of the first quarter, a decline nine basis points from the previous quarter and six basis points from a year ago.
MBA said the serious delinquency rate–the percentage of loans 90 days or more past due or in the process of foreclosure, fell to 2.76 percent, a decrease of 37 basis points from the fourth quarter and a decrease of 53 basis points from a year ago.
MBA said the percentage of loans on which foreclosure actions started during the first quarter rose to 0.30 percent, an increase of two basis points from the previous quarter but five basis points lower than one year ago. The percentage of loans in the foreclosure process at the end of the first quarter was 1.39 percent, down by 14 basis points from the fourth quarter and by 35 basis points than one year ago.
