UBS on consumer credit applications

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Every few months, UBS surveys a group of about 2,100 consumers in the United States about the state of their finances.

The survey includes questions about consumers’ financial stress levels and the likelihood of them defaulting on a loan. And, in the first three weeks of December, he asked a new question: How honest are your loan applications?

“We asked respondents who had taken out mortgage and consumer loans (student, auto or credit card) about the factual accuracy of their loan applications,” Matthew Mish and Stephen Caprio said in a note.

The findings are slightly disturbing. Here is Mish and Caprio again:

“Out of all consumers, we find 80% and 78%, respectively, of mortgage borrowers and consumer borrowers, who indicated that their information was completely correct and factual. By comparison, 66% of consumers most likely to default said their request was completely accurate and factual. For mortgage loans in particular loan inaccuracies, inflated assets (32%), underreported debt (24%), underreported expenses (21%) and inflated income (19%) were cited . “

In other words, 20% of all mortgage borrowers said their loan information was not entirely accurate and factual or said they would rather not say it, with that number rising to one-third of those. most likely to fail. Here is the graph:

Screenshot 26/01/2017 at 9:58 a.m. 28


UBS


We have already reported at length about the worrying state of US consumer finances.

It’s also important to note that this research comes at a time when credit cards are being handed out at historic rates, and several Wall Streeters are concerned about the auto loan market. According to New York research

Federal Reserve
, 6 million Americans have stopped paying their car loans.

UBS concluded:

“These responses do not suggest that a downward structural shift in consumer delinquency is imminent; conversely, they seem consistent with our earlier thesis that easy lending standards, growing consumer inequality and too much

liquidity
have resulted in too much capital to drive out too few creditworthy borrowers. “


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