More Loans for Car Buyers with Damaged Credit

We just released results from our latest quarterly survey of bank risk managers. In the survey, we included a couple questions about subprime lending. While many respondents (44%) expected overall subprime lending in 2012 to remain flat compared to 2011, the consensus was that if any sector sees an increase this year, it will be auto lending.

Here’s the breakdown of responses to the question, “Where will the largest increase in subprime lending occur in 2012?”

• Auto loans – 50%
• Credit cards – 38%
• Residential mortgages – 12%

It’s clear that we’re seeing a loosening in auto financing as consumer demand grows. However, underwriting for other types of consumer lending, particularly mortgages, is still a bit tight. Taking on greater risk for the sake of growing mortgage portfolios isn’t a trade-off that many lenders appear ready to make yet.

Subprime lending aside, the latest survey offered the same sense of cautious optimism that we saw last quarter. When asked about their expectations over the next six months, the majority of risk managers expected delinquency rates to remain flat or decrease for credit cards (69%), car loans (77%), mortgages (73%) and small business loans (72%).

Unfortunately, a majority (64%) expected delinquencies on student loans to increase.  This is the third consecutive quarter that respondents have predicted an increase in student loan delinquencies.

You can view our full quarterly survey results here. I see these results as quite positive, save for student lending. Last quarter, we had more respondents expecting things to improve than we had seen at any point in the previous two years. This quarter, lenders are expecting things to at least stay the same, and possibly improve further. These results indicate that many bankers believe consumer health has turned a corner.