The viewpoint of bank risk managers – pocked by expectations of tighter underwriting standards and increased delinquencies on consumer loans – has grown gloomier in recent quarters, a new survey says.
According to FICO's latest quarterly survey of bank risk professionals, 73% of respondents believe mortgage defaults will remain elevated for at least five more years. Forty-six percent of risk professionals said they expect delinquencies to increase over the next six months, while only 15% believe late-pays will decline over that period, according to the survey, which was conducted by the Professional Risk Managers' International Association on FICO's behalf.
Respondents also expressed little optimism when it comes to home prices. When asked if prices nationally would return to 2007 levels before the year 2020, 49% of respondents said no, whereas 21% said yes.
"While the housing sector will almost certainly gain strength during the next nine years, many bankers clearly believe prices will remain depressed for half a generation," says Andrew Jennings, chief analytics officer at FICO. "This puts the devastation of the housing crash into perspective."
Those surveyed also expressed concern about consumer credit health beyond mortgages. When asked their opinions about the next six months, a large number of survey respondents indicated that they expect delinquencies to rise on auto loans, credit cards and student loans, FICO reports.
To view FICO's third-quarter U.S. Consumer Credit Risk report, click here.