Most risk professionals who
participated in a recent survey believe the status quo is going to prevail when
it comes to loan delinquencies over the next six months. In survey conducted in the first quarter by FICO
and the Professional Risk Managers Association (PRMIA) the respondents, 58.5 of
whom said their main area of responsibility was mortgages, were asked to
predict the path of delinquencies for seven categories of loans. A plurality expect delinquency rates to stay
the same for most loan types and few expect to see further increases.
While 45.2 percent of respondents felt
mortgage delinquency rates would remain fairly constant over the next six
month, 38.5 percent do expect further declines compared to 31.3 percent in the
previous survey conducted in the fourth quarter of 2012. Less
than 20 percent expect delinquencies to increase to any degree. The same pattern was true of home equity
lines of credit (HELOCs). About 45
percent expect delinquencies in that category to remain about the same while 36
percent expect them to decrease compared to 29.4 percent in the previous
Responses to questions about credit
card, auto loan and small business loan delinquencies also reflect this view of
stability. The only loan category in
which the risk professionals expect significant change is in student loans
where nearly half of respondents expect slight increases and 16.4 percent
expect significant increases.
The study's authors said this may
partially reflect the many recent news stories about student debt but that as
risk professionals it is more likely they are speaking from day to day
experience. They point out that while
these opinions could be viewed an anomaly in an otherwise optimistic picture "it
is also possible that delinquencies in this form of debt could impact others as
individuals struggle to keep up with other debts. It will definitely be an area to watch."
The survey asked respondents about the
supply of credit over the next six months.
Most predicted that the supply of credit for residential mortgages would
meet demand or fall slightly below demand.
Less than 20 percent responded that supply would exceed demand. About 40 percent saw the supply of credit
for refinancing meeting demand while a slightly smaller percentage saw demand
slightly exceeding supply. The authors
called this "a small shift away from predictions of mortgage and refinancing
supply falling short, a positive sign." Most
viewed the supply of other types of consumer credit as more than adequate to
Respondents were asked how they felt
about home prices today as that affects mortgage risk. A majority (70.8 percent) felt that home
prices are rising at a sustainable pace although a minority (15.9 percent still
worry that there could be further home price corrections.
The survey also found that 57.5 percent
of the risk managers expect levels of existing customers who request credit
line increases to rise; 70 percent expect requests for business loans to
increase, and 63.7 percent said their institution had updated its credit
reporting system within the last two years.
The survey also asked the risk managers
about the highest priority for their institutions in 2013. An equal number cited improvements in
customer experience or improvements in utilization of Big Data analytics to
gain greater insight into customers. The
third most popular priority was strengthening of fraud prevention systems. FICO/PRMIA said this suggests that
institutions are focused on customer-related goals, recognizing that they haven't
yet fully rehabilitated their customer revenue stream after the economic
fallout of the last six years.