Sub-prime lending meltdown fuels risk and opportunityMortgagePress.comU.S. recession, consumer debt, credit cards, unemployment, consumer confidence
The effect of the sub-prime mortgage meltdown continues to
radiate out across the credit markets. Alan Greenspan, the former
Federal Reserve
chairman, stated in recent interviews that there is a one-in-three
chance of a U.S. recession. New research from TowerGroup explores the impact
on consumer debt and credit cards.
In analyzing four key economic factors that influence both the
U.S. economy and consumers' spending behaviors--unemployment,
consumer debt, consumer confidence and consumer savings--TowerGroup
forecasts that even as consumers moderate their spending in the
coming months, the number of consumer loan delinquencies will
continue to rise. Rate relief from federal regulators is only the
beginning of the story. Mortgage lenders are likely to bend to
public and government pressure to be more flexible when making
repayment arrangements with mortgage customers to prevent
foreclosure.
While the sub-prime mortgage credit collapse has tightened
credit availability in both consumer and commercial markets, banks
appear to be anticipating the need to slacken credit standards for
specific products like credit cards in an effort to accommodate
credit needs and increase balances. TowerGroup believes this
lowering of approval standards signals that credit card lenders are
preparing to attract and grow balances previously lost to home
equity lines of credit, which are now unavailable to many
consumers.
The loosening of standards for certain products represents an
opportunity for businesses that support credit card lenders with
products aimed at new customer acquisition. Marketing companies,
software providers and credit/risk scoring companies will benefit
from this shift. But while credit card issuers have the opportunity
to attract new customers, not everyone will be looking for
additional credit. TowerGroup expects continued growth in the
prepaid and debit card segments as well as a continuing shift in
dollar volume to transactors for households unwilling or unable to
take on additional debt.
For more information, visit www.towergroup.com.
