Lenders: Expectations of delinquencies down across all categories, including student loans

Loan delinquencies on a variety of credit products are expected to decline in coming months, fueling hopes for a more robust economic recovery in 2012, according to a report released this week by FICO and the Professional Risk Managers' International Association. More specifically, fewer lenders expect a rise in delinquencies on home, car and small business loans than at any time since the survey was launched in early 2010. However, expectations of a rise in late mortgage payments exceeded any other category, as 35 percent of surveyed lenders expect a surge in home loan delinquencies over the next six months, down from 47 percent in the fourth quarter of last year. Furthermore, 20 percent of respondents project car loan delinquencies to increase - down from 33 percent in the October-December period. Twenty-eight percent expect late payments on small business loan to rise - down from 39 percent - and 32 percent anticipate higher credit card delinquencies - an improvement of seven percentage points over last quarter and the lowest figure since the second quarter of last year. "As unemployment falls, even modestly, and four years of deleveraging begin to pay dividends, bankers are allowing themselves to feel some optimism," said Dr. Andrew Jennings, chief analytics officer at FICO. "Of course, we're not out of the woods. Foreclosures continue to put pressure on home prices, and jobs are coming back slowly." "But we seem to be headed in the right direction," Jennings added. "If we can avoid major bumps in the road, such as a spillover effect from the Eurozone crisis, we should continue to see delinquencies drop." The volume of student loan debt is perhaps the most troubling credit category. The Federal Reserve Bank of New York has already reported that the total amount of student debt in the U.S. now exceeds that of credit cards, but the recent FICO survey shows more than half of lenders - 51 percent - expect student loan delinquencies to rise over the next six month. That figure is down from 67 percent in the last survey but is still the second-highest level recorded since FICO initiated the index.