FICO’s quarterly survey of bank risk professionals found growing concern for the stability of the student loan market and deepening fears about the nation’s housing sector. The survey, conducted for FICO by the Professional Risk Managers’ International Association (PRMIA), shows that bankers expect delinquencies on most types of consumer loans to rise, balances on credit cards to grow, and global economic forces to put increasing pressure on the U.S. economy. The survey included responses from 312 risk managers at banks throughout the U.S. in November 2011. 

Regarding mortgages, 47 percent of respondents expected mortgage delinquencies to rise and 13 percent expected delinquencies to decrease. That is slightly more pessimistic than last quarter. When asked about credit cards, 45 percent expected delinquencies to rise while 21 percent expected a decline. That is also more pessimistic than last quarter and another sign of deteriorating confidence among bankers. In addition, 54 percent of respondents expected credit card balances to increase. These expected increases are likely due to higher spending by some consumers and financial stress for other consumers who are unable to pay down their balances.

Student loan debt now exceeds credit card debt in the U.S., with experts estimating that $750 billion in student loans are outstanding. In FICO’s survey, 67 percent of respondents expected delinquencies on these loans to rise. That is 19 percentage points higher than last quarter. Only eight percent of respondents expected a decline in delinquencies.

“Evidence is mounting that student loans could be the next trouble spot for lenders,” said Dr. Andrew Jennings, chief analytics officer at FICO and head of FICO Labs. “A significant rise in defaults on student loans would impact lenders as well as taxpayers, who could be facing big losses due to these defaults. Our survey results underscore the ongoing challenges that millions of American households face as they try to cope with their debt during these uncertain times.”

Survey respondents were also asked about global issues that could put pressure on the U.S. economic recovery. When asked about the most likely trigger for a possible double dip in the U.S. economy, the Eurozone debt crisis was cited most often (38.8 percent), just edging out U.S. government policies (38.4 percent). Another 19 percent are most concerned about the lack of spending and investment by U.S. companies.

Survey respondents were also asked about the economic growth of China as it relates to the future strength of U.S. consumers. Sixty-five percent of respondents felt that the global influence of Chinese consumers would overtake that of U.S. consumers within 5-10 years. By contrast, 28 percent felt that U.S. consumers would continue to wield more influence for another 20 years or longer.

“Whether it’s debt trouble in Europe or economic growth in Asia, there are significant implications for the near-term and long-term strength and health of the U.S. economy,” said Jennings. “There are risks, challenges and opportunities all around us. To compete in this increasingly complex global environment, we’re seeing more U.S. companies embrace innovative analytic technologies to help them understand and navigate the global playing field.”

Auto lending had a fairly balanced outlook with 33 percent of respondents expecting an increase in delinquencies, 22 percent expecting a decrease, and 45 percent expecting no change in the level of delinquencies.