FICO Releases Dismal Mortgage Delinquency Predictions

Mortgage and home equity lines of credit delinquencies are expected to rise, according to predictions by bank risk professionals polled by the Professional Risk Managers’ International Association in a survey sponsored by FICO (NYSE:FICO).

For the third straight quarter, risk managers don’t seem to expect delinquency rates for mortgages, home equity lines, credit cards, auto loans, small business loans, and student loans to improve any time soon, according to PRMIA.

Nearly half, at 47.1%, believe that mortgage delinquencies will increase, either somewhat or significantly—slightly more than was predicted during the previous quarter’s survey. Additionally, slightly more think that home equity line delinquencies will increase, at 44.3% in the fourth quarter of 2011 compared to 40% last quarter.


“Overall, delinquency predictions paint a somewhat pessimistic picture,” the report says. “Risk managers continue to express concern that delinquency rates are high and likely to grow higher.”

Looking ahead, while nearly one third of respondents think it’s “likely” that the U.S. will have negative GDP growth in 2012, more than half (51.7%) think it’s “unlikely.” And a little less than half (45.7%) think that the influence of Chinese consumers will surpass U.S. consumer influence within the next decade, compared to 19.5% who think this will happen sooner, within the next five years.

Written by Alyssa Gerace

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  • So how is it 2012 is supposed to be the year when the drop in values bottoms?  There are huge errors in the simpleton theory that home prices will turn around once home payments are lower than rent payments.

    The first is:  Who can afford the down payment?  Second, if qualification requirements stay high who will qualify?  Third, if you have a choice why buy when prices are falling?  Four, why would home prices rise when the foreclosure inventory is increasing?  Five, why won’t home owners who want and need to sell, sell into a rising market further pushing home prices lower?

    While mortgage payments being less than rent will help, there are other market forces at work which will not allow this simpleton theory to pan out by itself.  It is but one sign that the end MIGHT be near.

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