Foreclosure Woes to Plague Industry for at Least Five Years: Survey

A new quarterly survey of bank risk professionals from FICO paints a decidedly pessimistic picture of housing’s future. The company describes its latest results as a reversal of the growing optimism seen in late 2010 and early 2011.

The survey, conducted for FICO by the Professional Risk Managers’ International Association (PRMIA), shows that bankers expect delinquencies on consumer loans to rise, underwriting standards to become stricter, and the housing sector to continue struggling far into the future.

Among the 188 risk managers surveyed, 73 percent believe mortgage defaults and foreclosures will remain elevated for at least five more years.

Furthermore, 46 percent of respondents expect mortgage delinquencies to increase over the next six months, while only 15 percent anticipate a decline in mortgage delinquencies over the same period.

The negative sentiment among banks’ risk professionals also extended to property values. When asked if housing prices nationally would climb back to 2007 levels before the year 2020, 49 percent of respondents said no. Just 21 percent said yes.

“Housing has been an enormous drag on the economy for over three years as U.S. households lost trillions of dollars in equity,” said Dr. Andrew Jennings, chief analytics officer at FICO and head of FICO Labs.

Data from the Federal Reserve shows that between 2005 and mid-2011, Americans lost $7 trillion in home equity.
“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,” Jennings said. “This puts the devastation of the housing crash into perspective.”

Article is from DSnews.com.