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S&P/Experian: Mortgage default rates steady in January

3 cities report default rate increases

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Data released by global resource provider Standard & Poor's and information services company Experian, indicates that while the bankcard default rate increased in January, the first mortgage loan default rates remained largely unchanged.

Three of the five major cities saw their default rates increase during the month of January.

Los Angeles reported a default rate of 0.72%, up seven basis points from the December default rate.

Chicago's default rate increased two basis points from December, reporting a 1.02% default rate in January.

Dallas reported a default rate of 1.11% in January, up one basis point from the prior month.

New York recorded a default rate of 1.04% for the second consecutive month.

Miami reported a default rate decrease of 27 basis points in January with a default rate of 1.17%.

See picture below for S&P/Experian consumer default composite indices five MSAs.

Click to enlarge:

chart

"Nationally, consumer default rates were little changed in January," says David M. Blitzer.

"Bank card defaults rose from November to December and again to January, However, the series established a new low point in November and remains quite low compared to its recent history.

Moreover, the small decline in first mortgage defaults offset any damage in bank cards. On a regional basis, the five cities noted in the release bounced around, but none appeared to be warning of future difficulties,” added Blitzer.

See picture below for January 2016 results for the S&P/Experian credit default indices.

Click to enlarge 

chart

"The economy is taking on something of a split personality. The financial markets are suffering falling prices and a lot of volatility so far in 2016. The stock market is down about one percent, interest rates remain extremely low despite the Fed's action in December, and concerns about corporate earnings and credit are widespread,” Blitzer said.

“At the same time, home prices continue to climb, new homebuilding is rebounding and auto sales have been quite strong. The unemployment rate ticked down to 4.9% in January. Consumers do not appear to be overly worried about the stock market; their spending patterns haven't collapsed. Given further modest job growth and continued low inflation, there is no basis for near term worries over consumer spending,” Blitzer continued.

While the rate of first and second lien mortgage defaults fell in September at 0.76% and at 0.47%, down eight and 10 basis points from the previous month, according to data from the latest Equifax National Consumer Credit Trends Report, first-mortgage originations for subprime borrowers, consumers with an Equifax Risk Score of 620 or below, have shown steady growth from January to October 2015, with more than 312,000 new mortgages originated, totaling $50.7 billion.

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