Bankers Expect Delinquencies to Increase for Consumer Loans

Professional Risk Manager’s International Association (PRMIA) conducts a quarterly on-line survey for FICO. The most current one surveyed 188 bank professionals in August 2011. The bankers expected delinquencies to increase for consumer loans, underwriting would become stricter and the housing market would continue to struggle.  More than 48 percent feared the U.S. was heading into another recession. They expected delinquencies to rise for auto loans, student loans, mortgages and credit cards in the next six months.  Almost half thought it will take five years for credit card balances to reach pre-recession levels and nine years for housing to reach pre-recession levels.

Auto Loans

30 percent expected auto loan delinquencies to rise in the next six months; 21 percent expected them to fall.

Credit cards

40 percent expected credit card delinquencies to rise in the next six months; 23 percent expected them to fall.

Almost half (49.8 percent) believed the average credit card balance will increase over the next six months.

64 percent didn’t think credit card balances would reach pre-recession levels for at least five years.

Student loans

48 percent expected student loan delinquencies to rise in the next six months; 13 percent expected them to fall.

Housing/mortgages

49 percent didn’t think housing prices would reach 2007 levels before year 2020; 21 percent thought they would.

73 percent believed mortgage defaults would be high for five more years.

46 percent expected mortgage delinquencies to increase over the next six months; 15 percent believed they would decline.

Small Business

36 percent expected small business delinquencies to increase; 17 percent expected them to decrease.

57 percent expected small businesses to request more credit in the next six months.

34 percent expected credit extended by banks to small businesses to increase.

The bankers were very pessimistic about consumer and small business credit. This was a departure from their opinions in late 2010 and early 2011.  Let’s hope this isn’t reality.

Credit Expert, John Ulzheimer, is the President of Consumer Education at SmartCredit.com, the credit blogger for Mint.com, and a Contributor for the National Foundation for Credit Counseling.  He is an expert on credit reporting, credit scoring and identity theft. Formerly of FICO, Equifax and Credit.com, John is the only recognized credit expert who actually comes from the credit industry.  Follow him on Twitter here.

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