More Consumers Defaulting on Mortgage Payments, Data Reveals

Mortgage DefaultData released by Standard & Poor’s and credit reporting agency Experian show that mortgage loan default rates soared higher to close out 2014, but remained well below their level one year prior.

According to the latest S&P/Experian Consumer Credit Default Indices report, the national composite default rate moved up slightly from 1.07 percent in November 2014 to 1.11 percent in December. This figure remained a good deal lower than December 2013’s reading of 1.35 percent. However, first-mortgage default rates had gone up for the fifth consecutive month, ticking up from 0.97 percent in November to 1.02 percent in December. This was the biggest monthly increase since September 2013, though once again, the figure was much lower in December 2014 than it was the year prior, when first-mortgage default rates were at 0.97 percent.

Further, second-mortgage default rates were also up month-over-month, this time increasing by close to 20 percent from 0.48 percent in November to 0.59 percent in December. That remains lower than December 2013’s figure of 0.76 percent.

For non-mortgage debts, Experian reported mixed results, with the bank card delinquency rate increasing from 2.59 percent in November to 2.65 percent in December. However, the auto loan delinquency rate was down slightly, slipping from 1.05 percent in November to 1.02 percent in December.

“December was the fifth consecutive month with increasing national consumer credit default rates,” said S&P Dow Jones Indices managing director and chairman David Blitzer in a statement.

“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.”

In terms of individual metropolitan statistical areas, S&P and Experian reported a decrease in composite index default rates in Miami, where November 2014’s 1.46 percent rate improved to 1.34 percent in December. That is also less than one-half of December 2013’s reading of 2.74 percent.

On the other hand, Los Angeles’ composite default rate ticked up from 0.80 percent in November 2014 to 0.86 percent in December, but remained far removed from the year-ago rate of 1.07 percent. In Chicago, last month’s default rate was up a bit from 1.11 percent to 1.16 percent, but is still significantly below December 2013’s reading of 1.62 percent.

According to Blitzer, seasonality may be a reason why Chicago, Los Angeles, and other major cities reported increases in default rates. “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,” he observed. New York was another city where default rates had gone up, moving up seven basis points from 0.98 percent to 1.05 percent, the biggest among the metros covered by the report. However, default rates in New York are also down from 1.38 percent in December 2013 by a shade over 30 basis points.