Senior loan officers who responded to the Federal
Reserve’s quarterly survey of bank lending practices in October reported that
changes to bank lending standards for residential mortgage loans or home equity
lines of credit (HELOCS) over the previous three months were on net minor. Changes in demand for those loans was also
largely around the edges.
Seventy-two banks responded to questions on prime
residential mortgages, equally divided between “large banks,” those with total
domestic assets of $20 billion or more, and “other banks.” The number of respondents dropped
significantly for questions regarding non-traditional mortgages (35 banks, 20
of them “large”) and sub-prime mortgages.
Only six banks, again equally divided by size, answered questions in the
latter category while 62 banks said they made no such loans.
There was, on net a bit of easing in standards for
originating prime mortgages. Nine large
banks and one other bank reported moderate easing while moderate tightening occurred
at 2 other banks. Sixty banks reported
that their lending standards were essentially unchanged over the period and
none reported “considerable” easing or tightening.
Of the 35 banks that reported on non-traditional
mortgage lending, a category of residential mortgages including adjustable-rate
loans with multiple payment options, interest-only mortgages, and Alt-A products,
80 percent said their standards remained unchanged while 11 percent reported
some easing. Four of the six banks that
made subprime loans also reported no change with one each reporting slight
easing or slight tightening.
Of the 72 banks who responded to questions about
HELOC lending, 94 percent said standards were essentially unchanged over the
three month period. Five banks reported
they had slightly eased their standards and one had slightly tightened them.
Lenders were asked whether, apart from normal
seasonal variations, the demand for prime mortgages had changed. Fourteen banks or 19 percent said that demand
had been moderately stronger while to about the same number categorized the
demand as moderately weaker. Sixty
percent called demand about the same.
Of those banks who originate non-traditional
loans two-thirds called demand unchanged, and 26 percent called demand
moderately weaker. Only one lender reported any change in demand for subprime
loans, a moderate lessening.
There were 13 banks or 18 percent who thought
demand for HELOC loans had increased moderately while 9 banks or 13 percent
noted weaker demand. 49 banks called
demand about the same.
In their analysis of the Senior Loan Office
survey Wells Fargo Securities Economics Group said that the mortgage market
needs a boost, calling demand underwhelming.
Despite the residential market showing further signs of easing its
standards, fewer banks reported stronger demand for prime mortgages with
nontraditional and subprime following suit.
This, the Economics Group said, reflects “a
persistent concern about the lack of household formation and absence of the
first time homebuyer as renting continues to dominate.