November downgrades and defaults on residential and commercial mortgage-backed securities slowed to levels not seen since 2007, according to a report from Standard & Poor's. The housing market's collapse sparked downgrades from the credit rating agency to a peak at the beginning of 2010 when S&P made more than 12,000 downgrades on RMBS and collateralized debt obligations backed by the securities in January alone. Default rates on the collateral beneath the structured finance deals reached a peak of 10% in November 2009, climbing from a 2.8% low a year earlier. (Click on chart to expand.) But the global economic outlook began to change in late 2009 and continued into 2010. This stabilized credit spreads for and improved the performance of underlying collateral. Downgrades began to decline after January to roughly 1,000 in November. Default rates recovered as well, dropping back down to 2.9% as of November, according to S&P. But, according to S&P, struggles remain despite an improving economy. Cumulative defaults on structured securities reached $809 billion at the end of November. Of that, just more than half was originally rated triple A, the highest investment grade S&P can give a structured deal. "Because the credit performance of structured finance collateral tends to lag the overall economy, however, credit stabilization will continue to face a headwind of persistent high levels of unemployment and a weak labor market, which will likely continue to pressure the sector's overall credit performance going forward," S&P said. Write to Jon Prior.