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.
Posted via email from Title Insurance If Congress can’t agree on a fiscal cliff deal, a recession is likely, and that would hit the housing recovery hard. Nearly two-thirds of the nation’s housing markets will see price declines for the year through next June, according to analytics firm Fiserv (FISV). Overall, the gains will be just 0.3%. One big factor that could weigh on prices: The fiscal cliff. If Congress can’t agree on a deal to halt a series of tax increases and spending cuts, a recession is likely, and that would hit the housing recovery hard. In addition, if the Bush-era tax cut on capital gains is allowed to expire — allowing the rate to increase to 20% from 15% on Jan. 1 — it would take a significant bite out of the profits high-end sellers would realize and give them less to spend on buying a new home, said Celia Chen, an economist and housing market analyst for Moody’s Analytics. “Even people who do have the resources to buy homes will be more nervous,” she said. Related: Home prices: Your local forecast But even if we avoid the fiscal cliff, there are other factors weighing on home prices. In order to raise more tax revenue, Congress is considering putting a cap on the mortgage interest tax deduction, a key tax break aimed at encouraging homeownership — mainly among the upper-middle class. Most of the benefit of this deduction goes to wealthier households. Mortgage borrowers with incomes of $250,000 or more realize an average annual tax savings of $5,460, according to the Tax Policy Center. Meanwhile, those making less than $40,000 a year, save just $91. Capping the deduction would discourage buyers from buying bigger, more expensive homes, said Chen. But it’s not just the high-end of the market that could get squeezed. With Congress distracted by the fiscal cliff, there is a real chance that the Mortgage Debt Forgiveness Act of 2007 could expire come January 1. If the act were to lapse, struggling homeowners will have to start paying income taxes on the portion of their mortgage that is forgiven in a foreclosure, short sale or principal reduction. Related: Most affordable cities for homebuying That means homeowners will be on the hook for thousands of dollars in taxes that they likely can’t afford. That will force more people who could have sought a less damaging alternative, like a short sale, to choose foreclosure instead. Fiserv’s estimates assume that about half of the fiscal cliff tax hikes and spending cuts will occur, said Stiff. The forecast does not take into account any change to the mortgage interest deduction. Should that deduction expire, Stiff said home prices might be even weaker over the short-term. Fiserv expects home prices to start heating up again next fall. Between June 2013 and 2014, it expects prices to climb 3.4% and to continue to grow at an annual rate of about 3.3% over the five years through June 2017. Interesting comments about the effect of the fiscal cliff Posted via email from Title Insurance WASHINGTON – June 4, 2010 – The U.S. Department of Housing and Urban Development (HUD) is taking a closer look at the Real Estate Settlement Procedures Act’s (RESPA) prohibition against the “required use” of affiliated settlement service providers. It violates RESPA if a consumer is required to use a particular mortgage lender, title company or other settlement service provider that’s affiliated with another business in their mortgage transaction. However, it’s less clear whether it’s a RESPA violation if it is offered as a discount or other incentive to steer them to a lender, title company, etc. HUD is currently trying to determine if incentives violate the “required use” requirement. As part of the process, HUD published a notice about the issue and is seeking public comment. HUD took the step because it has received a number of consumer complaints, many of which focused on a home builder that might reduce the cost of a home (by adding free construction upgrades or by discounting the home price) if the homebuyer uses the developer or builder’s affiliated mortgage lender. In some cases, the incentives may not represent true discounts if the homebuyers ultimately pay more in total loan costs. Posted via web from Title Insurance
Continuing Ed for Title Agents
There’s a home price recovery… but it’s really, really slow – Dec. 5, 2012
Just about everybody agrees that the housing market is finally recovering — but don’t expect big price gains.
City
Forecast change
Medford, Ore.
8.7%
Yuma, Ariz
6.2%
Syracuse, N.Y.
5.2%
Hagerstown, Md.
5.2%
Pittsfield, Ma
4.9%
Naples, Fla.
-7.6%
Fort Lauderdale, Fla.
-7%
Orlando, Fla.
-6.9%
San Jose, Calif.
-5.9%
Phoenix
-5.8%
Continuing Ed for Title Agents
HUD reconsiders RESPA rule on incentives | REALTOR® Association of the Greater Miami and the Beaches
Continuing Ed for Title Agents
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