Mortgage Default Rate Improves In April


Dennis Norman

I know it looks like I’m doing my second post today on the same topic, but I’m really not……my post earlier today was about the rate of mortgage delinquency, which can be defined as homeowners that are late, to varying degrees, on their house payments. This post is about mortgage default rates, which is homeowners that are over 90 days late on mortgage payments, have filed bankruptcy, are in foreclosure or on whom the lender has written off part or all of the balance of the loan. In other words these are the borrowers that, unlike the “delinquent ones” that may get current again, for the most part, are not going to recover and are likely to lose their homes. Also, now I have some data for April as well.

According to the Standard & Poor’s and Experian Consumer Credit Default Indices, we may be seeing some easing of the pain. Their report for showed that default rates for first and second mortgages declined in April which I think is significant. The other thing that is significant is the S&P/Experian Indices are not seasonally-adjusted. In my earlier post today it was pointed out that the first quarter data from the MBA that showed an increase in the mortgage delinquency rate was “seasonally adjusted”, but when they looked at non-seasonally-adjusted numbers there was a decrease in delinquency rates.

So in real-time, unadjusted numbers, we have mortgage delinquencies improving in the first-quarter of this year, followed by a decrease in the mortgage default rate in April. Maybe, just maybe, this run-away train is finally losing some steam! Another thing worth noting in the S&P/Experian report is that, while the home mortgage default rate is decreasing the credit card default rate is on the rise. This is in sharp contrast to recent months when the opposite was true…I think this shows a changing sentiment among the homeowners out there that are now focusing more on paying house payments, and keeping their homes, in advance of making credit card payments.



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