S&P/Experian Credit Default Indices Show Decreases in Default Rates in May

Data through May 2011, released today by S&P Indices and Experian for the S&P/Experian Consumer Credit Default Indices, a comprehensive measure of changes in consumer credit defaults, showed first and second mortgages default rates decreased in May to 2.09% and 1.42%, respectively, from April values of 2.16% and 1.51%. Auto loans default rate went down from 1.45% in April to 1.34% in May; while bank cards experienced a slight increase from 5.91% to 5.93%.

“While we might observe volatility from month-to-month, looking at default rates over the past few years it is easy to see that consumers have come a long way in fixing their balance sheets, ” says David M. Blitzer, Managing Director and Chairman of the Index Committee for S&P Indices. “All indices show default rates below where they were this time last year, and more so if you look back to 2008/2009.

“We do continue to see some differences among the cities. While Miami’s high unemployment rate contributes to its high default rate compared to some of the other cities, such as New York and Chicago, it is not the only variable. The latest MSA-level unemployment data show that at about 11%, Los Angeles and Miami have unemployment rates above the national average; however, the 2.39% default rate for Los Angeles is almost half that of Miami’s 5.31%. Among the other local factors affecting default rates is the aftermath of the housing bust. While both Los Angeles and Miami were among the cities with the largest home price increases, housing in southern California is doing better than housing in south Florida.”

Consumer credit defaults varied across major cities and regions of the U.S. Among the five major Metropolitan Statistical Areas (MSAs) reported in this release each month, Los Angeles and New York continue to lead the way with the largest decrease in defaults rates to 2.39% and 1.94%, from 2.57% and 2.11%, respectively. Chicago and Miami were not far behind with defaults decreasing to 2.37% and 5.31%. Dallas’s default rates increased modestly this month to 1.59% from 1.56%.

Jointly developed by S&P Indices and Experian, the S&P/Experian Consumer Credit Default Indices are published on the third Tuesday of each month at 9:00 am ET. They are constructed to accurately track the default experience of consumer balances in four key loan categories: auto, bankcard, first mortgage lien and second mortgage lien. The Indices are calculated based on data extracted from Experian’s consumer credit database. This database is populated with individual consumer loan and payment data submitted by lenders to Experian every month. Experian’s base of data contributors includes leading banks and mortgage companies, and covers approximately $11 trillion in outstanding loans sourced from 11,500 lenders.

For more information, please visit: www.consumercreditindices.standardandpoors.com.

S&P Indices, a part of McGraw-Hill Financial, is the world’s leading index provider maintaining a wide variety of investable and benchmark indices. Over $1.25 trillion is directly indexed to Standard & Poor’s family of indices, which includes the S&P 500, the world’s most followed stock market index, the S&P/Case-Shiller Home Price Indices, the leading measure of U.S. home prices, the S&P Global BMI, an index with approximately 11,000 constituents, the S&P GSCI, the industry’s most closely watched commodities index, and the S&P National AMT-Free Municipal Bond Index, the premier investable index for U.S. municipal bonds. For more information, please visit www.standardandpoors.com/indices.

Formed as a response to market needs, Experian Capital Markets leverages Experian’s comprehensive U.S. consumer and business databases to provide data and analytics to serve the transparency needs of the structured finance market participants. By taking underlying borrower data and applying advanced analytics, Experian provides insight into U.S. consumer and business credit behavior across all obligations, helping to forecast future payment patterns on prepayments, delinquencies, charge-offs or defaults for non-agency residential mortgage-backed securities and other asset-backed securities.