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Loan Officer Survey: Lending Regs No Looser

by devteam May 4th, 2011 | Share

Senior loan officers responding to the April 2011 FederalrnReserve Bank survey on bank lending practices indicated that, on net, bankrnlending standards and terms have generally eased somewhat further during thernfirst quarter of the year.  Thernrespondents also noted that while the demand for commercial and industrial loanrn(C&I) and commercial mortgages increased, demand for residential mortgagerncontinued to decrease.</p

 The Fed’srnquarterly survey garnered responses from 55 domestic banks and 22 U.S. branchesrnand agencies of foreign banks and was conducted between March 29 and April 12.  For purposes of categorizing responses, largernand middle-sized banks were defined as those with assets greater than or equal to $20 billion as of December 31,rn2010, and “other” banks as those with assets of less than $20rnbillion.</p

Lending officers were asked two questions about residentialrnmortgage lending at their bank and two about revolving home equity lines ofrncredit.  The questions all applied to thernprevious three months of operation.  Informationrnwas gathered for each of three categories of loans – prime loans including bothrnfixed-rate and adjustable-rate; non-traditional, including adjustable raternloans with special features such as option payment; Alt-A products with limitedrnincome verification or secured by non-owner occupied properties; and subprimernloans.  </p

For each category the officers were asked how the bank’srncredit standards for individual mortgage loans had changed.  Respondents said that prime loans standardsrnhad remained essentially unchanged at 49 banks (92.5 percent).  Two large banks reported that standards hadrntightened somewhat (3.8 percent) and two that it had eased somewhat.  No banks reported a considerable easing orrntightening of standards. </p

Standards for subprime loans (what subprime loans?) had been moderately loosened byrn24 banks (45.3 percent) and remained unchanged at 23 institutions (43.4 percent).  Five responded that standards had becomernmoderately stronger and one substantially stronger.  There was virtually no distinction betweenrnthe answers of large and other banks.</p

While officers of 53 banks responded to the questions onrnprime and subprime loans, only 20 gave answers about non-traditional loans andrn18 or 90 percent responded that standards were unchanged.  Two, both other banks, said that standardsrnhad tightened somewhat.  </p

Bank officers were also asked to assess the demand forrnresidential mortgage loans over the previous three months in each of therncategories.  Most banks responded “aboutrnthe same” which received 23 responses or 43.4 percent and “moderatelyrnweaker” which received 24 (45.3 percent). rnFive bankers found the demand to be moderately stronger and one substantiallyrnstronger.  </p

Eight to 38.1 percent of 21 respondents said that demand forrnnontraditional mortgages had remained about the same; four (19 percent) saidrndemand had strengthened moderately and nine said it had weakened moderately.</p

Fewer than three bank officers responded regarding demandrnfor subprime mortgages so their answers were not tallied.  (No such thing as subprime anymore!)</p

The same pattern was repeated with home equity lines ofrncredit with 49 banks (90.7 percent) reporting that standards were basicallyrnunchanged and four that standards had eased somewhat.  One bank reported considerable tightening ofrnstandards.</p

Demand for home equity loans was moderately weaker at 17rnbanks (31.5 percent) and substantially weaker at one.  Twenty-nine of the 54 banks (53.7 percent)rnsaid demand was essentially unchanged while seven, all but one other banks,rnreported moderately stronger demand.</p

Refinance Demand Wanes. Purchase Apps in the Pipeline?</p

Existing Home Sales Still Hindered by Uber Tight Lending Regs</p

Senior Loan Officer Survey: Lending Standards Expected to Remain Tight </p

Tight Credit Limits Home Buyer Demand. Cash is King</p

Beige Book: Loan Quality Improving As Credit Standards Tighten

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About the Author

devteam

Steven A Feinberg (@CPAsteve) of Appletree Business Services LLC, is a PASBA member accountant located in Londonderry, New Hampshire.

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