Bank executives who are responsible for risk expect the level of late payments on home mortgages to rise. The group predicted that strong loan demand will be met with tougher underwriting.
More than half of bankers project mortgage delinquency will increase over the next six months.
That was the finding of a quarterly survey of 235 bank risk professionals conducted for FICO by the Professional Risk Managers’ International Association. Help for the report was provided by the Zell Center for Risk Research at the Kellogg School of Management.
Just 14 percent of the surveyed bankers projected that delinquency will decline.
But the outlook was better than in the previous report, when 60 percent of the respondents predicted that defaults would deteriorate.
“Respondents were also asked about their overall expectations for new delinquencies (i.e., accounts that become 30-days late) and charge-offs (i.e., older delinquencies that are written off),” FICO said. “Respondents felt both categories of delinquencies were going to rise, and the sentiment was similar in strength for both categories, which suggests the pipeline of delinquencies isn’t going to shrink in the near future.”
The report said that nearly three-quarters of the respondents expect credit application volume to at least stay as strong as it is now for the next six months. But 46 percent expect approval criteria to become more strict and 38 percent see a decline in the approval rate.
“Although the outlook isn’t as pessimistic as it was earlier this year, it’s clear we still haven’t reached a point of equilibrium between supply and demand for consumer credit,” FICO said chief research officer Dr. Andrew Jennings. “Banks remain concerned about loss prevention.”
