Housing Recovery for Real, According to 71% of Lenders in FICO Survey
Home price gains expected to stick and mortgage defaults expected to drop; banks turning to Big Data analytics to know their customers better
SAN JOSE, Calif., April 9, 2013 /PRNewswire/ -- In its quarterly survey of U.S. bank risk professionals, FICO (NYSE: FICO), a leading predictive analytics and decision management software company, found lenders more bullish on the housing recovery than at any point in three years, with 71 percent of respondents saying home prices are "rising at a sustainable pace" in the context of mortgage lending risk. In addition, 39 percent of respondents are expecting mortgage delinquencies to decrease over the next six months, while another 45 percent expect delinquencies to remain flat and only 16 percent expect an increase. Those are the most optimistic figures recorded in the 12 quarters since the survey was launched.
The survey, conducted for FICO by the Professional Risk Managers' International Association (PRMIA), also found that a majority of bankers (59 percent) expect the supply of credit for residential mortgages to meet demand over the next six months, and a slightly larger majority (60 percent) expect the supply of credit for mortgage refinancing to meet demand.
"The latest survey results, combined with data that indicates the real estate market is improving in many regions, paint a positive picture for a sector of the economy that has been slow to join the recovery," said Dr. Andrew Jennings, chief analytics officer at FICO and head of FICO Labs. "Mortgage lenders have been understandably guarded over the past five years. The improvement in their sentiment should be welcome news, and I wouldn't be surprised to see lenders cautiously expanding their mortgage and home equity lending businesses."
Optimism extends beyond mortgage lending
Large majorities of survey respondents believe that consumer credit health is improving across several types of loans. The percentage of respondents expecting delinquencies to remain steady or decrease during the upcoming six months for various loans was as follows
As the numbers indicate, student loans were the sole area of pessimism expressed by respondents. This is the sixth consecutive quarter in which there was significant concern about delinquencies on student loans.
Meanwhile, a majority of respondents (57 percent) expect the amount of credit requested by consumers to increase in the upcoming six months. A plurality (46 percent) expect the amount of credit extended by lenders to increase, and by a margin of nearly 2-to-1 (37 percent to 19 percent), lenders expect the approval rate on consumer loan applications to increase rather than decrease.
Big Data to Become a Big Deal at Banks
The survey also asked respondents about the 2013 business priorities at their institutions. Two related initiatives tied for the top spot – utilizing Big Data analytics to gain greater insight into customers, and improving the customer experience. Both were named as the top priority by 35 percent of respondents. Strengthening fraud prevention was cited as the top priority by 20 percent of respondents, and nine percent of respondents said that increasing their utilization of mobile technology was the highest priority in 2013.
A detailed report of FICO's quarterly survey is available at http://www.prmia.org/PRMIA-News/Fico-1stQuarterApr2013Rev1.pdf. The survey included responses from 255 risk managers at banks throughout the U.S. in February and March 2013. FICO and PRMIA extend a special thanks to Columbia Business School's Center for Decision Sciences for its assistance in analyzing the survey results.
The Professional Risk Managers' International Association (PRMIA) is a higher standard for risk professionals, with 65 chapters and more than 85,000 members worldwide. A non-profit, member-led association, PRMIA is dedicated to defining and implementing the best practices of risk management through education, including the Professional Risk Manager (PRM) designation and Associate PRM certificate; webinar, online, classroom and in-house training; events; networking; and online resources. More information can be found at www.PRMIA.org.
FICO (NYSE: FICO) delivers superior predictive analytics solutions that drive smarter decisions. The company's groundbreaking use of mathematics to predict consumer behavior has transformed entire industries and revolutionized the way risk is managed and products are marketed. FICO's innovative solutions include the industry-leading solutions for measuring credit risk, managing credit accounts, identifying and minimizing the impact of fraud, and customizing consumer offers with pinpoint accuracy. Most of the world's top banks, as well as leading insurers, retailers, pharmaceutical companies and government agencies, rely on FICO solutions to accelerate growth, control risk, boost profits and meet regulatory and competitive demands. FICO: Make every decision count™.
For FICO news and media resources, visit www.fico.com/news.
Statement Concerning Forward-Looking Information
Except for historical information contained herein, the statements contained in this news release that relate to FICO or its business are forward-looking statements within the meaning of the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially, including the success of the Company's Decision Management strategy and reengineering plan, the maintenance of its existing relationships and ability to create new relationships with customers and key alliance partners, its ability to continue to develop new and enhanced products and services, its ability to recruit and retain key technical and managerial personnel, competition, regulatory changes applicable to the use of consumer credit and other data, the failure to realize the anticipated benefits of any acquisitions, continuing material adverse developments in global economic conditions, and other risks described from time to time in FICO's SEC reports, including its Annual Report on Form 10-K for the year ended September 30, 2012 and its last quarterly report on Form 10-Q for the period ended December 31, 2012. If any of these risks or uncertainties materializes, FICO's results could differ materially from its expectations. FICO disclaims any intent or obligation to update these forward-looking statements.
FICO and "Make every decision count" are trademarks or registered trademarks of Fair Isaac Corporation in the United States and in other countries.
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