Lenders’ Risk Managers Expect Mortgage Delinquencies to Drop

FICO's ""quarterly survey"":http://www.prmia.org/PRMIA-News/Fico-1stQuarterApr2012a.pdf of bank risk professionals found a reversal in the sentiment of U.S. lenders, with expectations for loan repayments more upbeat in the first quarter of 2012 than they had been during the previous quarter.

[IMAGE]

The survey, conducted for Minneapolis-based ""FICO"":http://www.fico.com by the ""Professional Risk Managers' International Association"":http://www.prmia.org (PRMIA), found fewer lenders anticipating a rise in delinquencies on home loans than at any time since FICO launched its survey in early 2010.

In the latest survey, the number of respondents expecting mortgage delinquencies to increase over the next six months was 12 percentage points lower than last quarter â€" dropping from 47 to 35 percent.

[COLUMN_BREAK]

""As unemployment falls, even modestly, and four years of deleveraging begin to pay dividends, bankers are allowing themselves to feel some optimism,"" Dr. Andrew Jennings, FICO's chief analytics officer and head of FICO Labs, said.

""Of course,"" Jennings stressed, ""we're not out of the woods. Foreclosures continue to put pressure on home prices, and jobs are coming back slowly. But we seem to be headed in the right direction. If we can avoid major bumps in the road, such as a spillover effect from the Eurozone crisis, we should continue to see delinquencies drop.""

Lenders' optimism doesn't end with mortgages either. They anticipate the holistic picture of consumer and household debt to improve, with fewer respondents expecting delinquencies to rise for small business loans or any personal finance items â€" including auto loans, credit cards, and even student loans â€" than in previous surveys.

However, when asked about the availability of credit for specific loan types over the next six months, the majority of respondents expect supply to meet or exceed demand for all loan types except mortgages.

The credit gap persists in housing, with lenders unsure about the real estate sector. Fifty-six percent of respondents believe credit supply will not meet demand for residential home loans.

The FICO survey included responses from 263 risk managers at banks throughout the United States and was conducted in February 2012.