Most bankers don't see credit easing
Survey shows less pessimism about mortgages
By Inman News, Tuesday, September 7, 2010.Few bank risk managers expect credit standards will be relaxed this year, and nearly half see room for further tightening, according to a quarterly survey conducted for FICO by the Professional Risk Managers' International Association (PRMIA).
The survey showed bankers aren't as pessimistic as they were during the first quarter, but suggested that consumer credit will fall short of demand for the rest of the year.
Andrew Jennings, chief research officer at FICO, noted that government data released in August showed personal bankruptcies at their highest levels in five years, and that other data demonstrates "ongoing challenges" in housing and employment.
"This type of economic environment makes it difficult for lenders to open up the flow of credit without taking on significant risk," Jennings said in a press release.
A majority of the 235 bank risk officers surveyed in July -- 53 percent -- expected mortgage delinquencies to increase, down from 60 percent during the second quarter. About a third of those surveyed said they expected mortgage delinquencies would remain the same, and 14 percent expected a decrease.
Less than 4 percent of bank risk officers who are responsible for auto loans and credit cards expected delinquencies on auto loans to fall this year, but 15 percent expected improvement in credit card delinquencies.
More than 1.5 million individuals and families filed for bankruptcy in the year ending June 30, a 21 percent increase in one year, according to the latest numbers from the Administrative Office of the U.S. Courts.
Statistics show non-bankruptcy filings have more than doubled from 727,167 recorded in the year ending June 30, 2007, to their highest level since new laws that raised the bar for filing bankruptcy took effect.
Bankruptcy filings stay on a borrower's credit report for seven to 10 years, and usually have a serious impact on FICO scores, because they typically invovle defaults on multiple loans, such as a mortgage, auto loan and credit cards.
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Submitted by Antoine Pirson on September 7, 2010 - 3:27pm.
Those who are interested in these topics will know that what was written here is completely false.
The short asnwer is simple: banks do not want to lend, becuase they can make more money elsewhere (like borrowing at the discount window and invest in real estate hedge funds, as long as they keep the toxic asset on the books)
The risk DOES NOT go up. In fact it goes down the more they lend for the simple reason that (RE) prices would go up as well. And by the way, the 20% down is reducing the risk to almost nothing, unless you keep saying that real estate is still plunging. But it is NOT.
Let me give you some examples of what banks are doing:
A fourplex property with an income of 39,000 per year cannot get a loan of 330,000 becuase the bank says the risk is too high? What risk is that exactly? With payment about $1900 per month, that would be only a 15,000 gross profit to pay for taxes and insurance, and water.
A buyer wants to buy a SFR for 175,000, and has been pre apporved with 20% down. The appraisal comes in at $145,000, becuase appraiser uses the wrong comp, and was probaly told by the bank to appraise very conservatively. The buyer offers 160K, and the bank refuses ( this was a short sale).
Banks are preventing real estate values to stabalize or increase becuase of their NON lending practises ( or if you prefer underwriting guidelines that only a millionair can take).
Antoine E Pirson, Broker, MBA