S&P/Experian: First Mortgage Defaults Reach 2007 Levels

Consumer credit default rates decreased for the sixth straight month as the national composite went from 1.62% in May to 1.52% in June, according to the latest S&P/Experian indices.

Fewer borrowers defaulted on their mortgage loans in June compared to the prior month, S&P revealed. The first mortgage default rate decreased from May’s 1.5% to June’s 1.41%, reaching its May 2007 level. In May 2009, the first mortgage default rate peaked at 5.67%.

Meanwhile, the second mortgage default rate also declined from May to June, going from 0.88% to 0.73%, respectively. S&P said this rate marks an eight-year historic low.

“There is only positive news in June’s numbers. In the past three years, households have come a long way in repairing their balance sheets,” said David Blitzer, managing director and chairman of the index committee for S&P Dow Jones Indices.

Another index that saw default rates fall month-over-month and reach its lowest levels since the end of 2007 were bank card loans. Bank card default rates dropped 38 basis points to 3.97% in June compared to 4.35% the prior month.

Auto loans were the only group to see default rates rise month-over-month. However, the increase was only one basis point above last month’s historic low, reaching 1.04% in June.

“June data continued a positive trend in consumer credit quality,” Blitzer said. “Consumer default rates are falling and we are approaching new lows across most loan types. In the last recession most default rates peaked in the spring of 2009; since then the decline has been bumpy but consistent.”