In another sign that more foreclosures are on the way, defaults on first mortgages rose last month as defaults on other credit categories declined.
the S&P/Experian Consumer Credit Default Indices today reported that first mortgage default rates rose to 2.08 percent in October from September’s 1.99 percent.
As mortgage defaults increased, defaults on auto loans and second mortgage default rates decreased slightly. Auto loans moved down from 1.29 percent in September to 1.22 percent; second mortgage defaults fell from 1.32 percent to 1.29 percent in October. Bank card default rates declined the most, from 5.36 percent in September to 4.85 percent.
“This month’s data show how much weight first mortgage default rates have in the national composite, about 84 percent,” said David M. Blitzer, Managing Director and Chairman of the Index Committee for S&P Indices. “Auto loan, second mortgages and especially bank cards all saw pretty significant drops in their default rates. However, the national composite rose with first mortgages. Home purchases are obviously very large investments, so first mortgage loans are substantially larger than any other consumer loan type. Consequently, when such a loan goes into default it is more serious from the perspective of the consumer’s overall financial status than the others.
“This is the second time we have seen the rates go up for first mortgages since November 2010. Looking at the regions, Chicago saw the largest increase, moving from 2.47 percent to 2.64 percent. Miami fell the most, to 4.16 percent, well below the near 19 percent it had registered a little more than two years ago. While we continue to see some monthly volatility in these numbers, the broad trend seems to be that consumers are continuing to repair their balance sheets.”
Among the five major Metropolitan Statistical Areas (MSAs) reported in this release, Miami showed a substantial decrease in default rates from 4.59 percent in September to 4.16 percent in October. Chicago, Los Angeles and New York increased in September. Dallas default rates moved down slightly from 1.33% in September to 1.30% in October.