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Risk Managers Share Positive Outlook for Mortgage, Equity Loans

Optimism among bankers continued to rise in the year's third quarter, according to ""survey results"":http://www.prmia.org/PRMIA-News/Fico-3rdQuarterSept2012.pdf released by the ""Professional Risk Managers' International Association"":http://prmia.org/ (PRMIA).

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The survey, conducted by PRMIA for ""FICO"":http://www.fico.com/en/Pages/default.aspx, showed that the majority of bank risk professionals expect mortgage loan delinquency to either fall or remain the same.

A combined 75.7 percent of respondents said they expect mortgage delinquency will either stay flat or decrease in the next six months, while 24.2 percent expect delinquency will rise-a 2 percent decrease from Q2 and an 11 percent decrease from Q1. PRMIA called the drop in delinquency predictions ""encouraging,"" as sentiment on delinquency usually experiences a dip in the third quarter.

At the same time, roughly 74 percent of respondents said they expect delinquency on home equity lines of credit (HELOCs) to either fall or remain flat. The ""American Bankers Association"":https://themreport.com/articles/q2-sees-increases-in-home-related-delinquencies-2012-10-08 reported earlier a 4.09 percent increase in HELOC delinquency in Q2.

Respondents expressed more muted confidence on the issue of supply and demand for lending products. Just more than half (51 percent) of respondents are expecting an adequate credit supply for new mortgage financing to match increasing demand in the housing market. Meanwhile, 59 percent of those surveyed expect lending will be able to keep pace with demand for mortgage refinancing.

Student loan debt became the one wrench in the works, with 61.1 percent of risk managers expecting an increase in delinquency. Rising student debt may take a toll on housing as young adults find themselves too burdened by their current loans to take on a mortgage loan.

""It looks like the consumer credit markets are now performing pretty well,"" said Dr. Andrew Jennings, chief analytics officer at FICO and head of FICO Labs. ""The economy may not be going gangbusters, but credit activity seems to be picking up and lenders appear to have a handle on risk.

""However, a couple of persistent issues are causing problems for many households and creating a headwind for the broader economy-the tight market for new mortgage lending and the rise in student loan debt, which is weighing down many young adults,"" he continued.

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