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Home Loan Defaults Drop while Credit-Card Defaults Rise

A U.S. central bank official said Tuesday that the Federal Reserve is unlikely to hike mortgage rates any time soon given what is likely to be a slow move out of recession.  Default rates for first and second mortgage loans declined in April from March but rose for the third month in a row for bank cards, to data released today from Standard & Poor’s Ratings Services.  The defaulting balances of bank-card loans were 9.1% in April, up from 8.9% in March and 7.7% a year earlier. First and second mortgage default rates were 3.7% and 2.5%, respectively, both down from March. Auto loan defaults were 1.9%, dropping from 2.4%.

David Blitzer, chairman of the index committee at S&P Indices, said consumer defaults for mortgage loans bottomed out around the same time as the stock market in early 2009. Bank cards, on the other hand, continue to worsen and are at levels not seen in the history of S&P’s indices. That could spell bad news for consumer spending which has shown improvement in recent months.  “With attention focused on consumer spending and little hope for a fast rebound in housing, the bank card series may raise concerns for many consumer related businesses as well as for consumer oriented lending institutions,” Blitzer said.

Consumer-credit defaults varied across major cities and regions in the U.S., with Chicago showing the smallest decline in the past year among the five metropolitan areas included each month in the data. However credit card debt settlement and bankruptcy filings Sharper declines were seen in Los Angeles and Miami, reflecting a somewhat more stable, though still weak, housing market as well as some economic improvements.

Posted in Mortgage News, Published Loan Articles.

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