Nearly half of bank risk managers surveyed for a quarterly report expect residential delinquency to increase.
The survey of 272 bank risk managers was announced Tuesday by FICO. The quarterly report was conducted during May and June by the Professional Risk Managers International Association on behalf of the credit technology firm and analyzed by the Columbia Business School.
According to the study, 46 percent of the respondents expect residential delinquency to increase over the next six months. Just 18 percent forecasted a decline.
“This isn’t surprising given the fact that average home equity in the U.S. has dropped from 61 percent in 2001 to 38 percent today,” FICO Chief Analytics Officer Dr. Andrew Jennings said in the report. “With millions of homeowners under water on their mortgages, it is very hard to see the light at the end of the tunnel. It is likely to take years to work through all the troubled mortgages.”
It was the same story for home-equity lines of credit, with 46 percent of the bankers predicting an increase in HELOC late payments. But the share that was optimistic about HELOC delinquency improving was slightly bigger than for closed-end loans: 22 percent.
Another finding was that only 28 percent of the professionals believe that 30-year mortgage rates would exceed 6 percent this year. In Freddie Mac’s latest Primary Mortgage Market Survey, the average 30-year fixed-rate mortgage was 4.60 percent.
The report also noted that just 30 percent of the respondents see an increase ahead for credit-card delinquency, while only 21 percent expected auto-loan performance to deteriorate.