Mortgage default rates hold steady at recent lows

Today, September 20th, S&P Indices and Experian released August data for the S&P/Experian Consumer Credit Default Indices, which measure changes in consumer credit defaults, and the results were fairly optimistic. The indices showed first and second mortgage default rates remained almost flat, with the first mortgage rate moving down from 1.93% in July to 1.92% in August and second mortgage slightly up from 1.25% to 1.27%.

The first mortgage index shows default rates at their lowest in four years; while the second mortgage index is close to its lowest level in five years (July’s rate of 1.25% was technically the lowest). First mortgage default rates peaked in May 2009 at 5.67%; second mortgage default rates had peaked two months earlier at 4.66%.

S&P/Experian Credit Default Indices. Sources: S&P Indices and Experian.

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  1. Jason Scott says:

    Do you have the same statistics on Mortgage default based on regional data? As the sand states have seen the highest amount of real estate devaluation, how do they compare against the average?

    • Dave Guarino says:

      Hi Jason
      S&P Indices does have statistics on mortgage defaults, broken out by region. Please contact our client sevices group for more information: 212 438 2046.
      Thanks for following our research. – Dave

  2. Thomas McGovern says:

    It seems that you have a bias towards presenting a rosy scenario when you state that “the results were fairly optimistic.” What is the basis for optimism with “…first mortgage rate moving down from 1.93% in July to 1.92% in August and second mortgage slightly up from 1.25% to 1.27%.” Based on the numbers, I’d say that the results were slightly pessimistic. Is there something behind the numbers that you see as optimistic?

    • Maureen Maitland says:


      Thanks for your comment. We are looking at the broader picture, not just the monthly change. In May 2009 the first mortgage default rate was about 5.67%, so 1.93% is quite an improvement. The same is true for the second mortgage default rate, which peaked at 4.66% in March 2009 and was 1.27% in August 2011. Both of these statistics have shown about two years of improving trends, which we believe is a good sign for the housing market.

  3. Jason Scott says:

    What do you make of the trend of the rising defaults of 2nds over 1sts till 2008 when it reverses and is 100 bps below the 1st?

    Usually when a mortgage is defaulted the 1st will get some principal back but the 2nd is usually wiped out, what led to the 2nds falling more rapidly than the 1sts?

    • Maureen Maitland says:

      Hi Jason,

      In general, we have observed that the 2nd mortgages are those used to either borrow equity from a home or to avoid using jumbo mortgages. As such, they were usually used by individuals who were willing to be highly leveraged in home ownership.

      As the market began to turn, 2nd mortgages were the first to be hit by defaults, which is which is why you observed the higher default rates in 2006 – 2008.

      However, once the housing market was truly in crisis those mortgages had very severe tightening of standards. There were simply fewer of them put on the market, and those that were went to consumers that had to pass more rigorous credit standards and were not likely to default. So what you are observing from 2008 – now is likely the result that there are simply fewer such mortgages, with less risk of default, so lower default rates.

      Please note that our data is based on gross loss, so we are simply observing loans that go into default. We do not look at any equity payouts to 1st or 2nd liens.


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