In its quarterly survey of U.S. bank risk professionals, 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.