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The October Senior Loan Officer Opinion
Survey on Bank Lending Practices conducted by the Federal Reserve found few
changes in the supply of, and demand for residential loans over the past three
months. The survey addresses all types of commercial, industrial and
residential lending among large banks.
Fifty-one domestic banks and 22 U.S. branches and agencies of foreign
banks responded to the October survey.
Loan officers were asked whether their
bank’s credit standards for approving applications for home mortgages had
changed with respect to prime loans, nontraditional loans such as option, interest
only, and Alt-A products; and subprime loans.
Forty-four of 48 banks reported that their credit standards for prime
loans had remained basically unchanged over the period while 2 reported some
tightening of standards and 2 reported some easing. More than half of the banks queried responded
that their banks did not do non-traditional loans, but of the 21 that did all
reported that their credit standards had remained basically unchanged. The responses to the same question regarding
subprime lending were too few to include in the report.
The survey asked whether, apart from
seasonal variations, the demand for newly originated residential mortgages had
changed over the three month period.
Fifteen banks reported a moderately stronger demand for prime mortgages
and eight said demand had been moderately weaker; the remaining 24 reported
Demand for nontraditional mortgages was
moderately stronger according to five banks and moderately weaker at four
institutions. The remaining 13 reported
no change while 26 respondents said their banks did not originate such
loans. Again there were too few
responses in the subprime category to tally.
Fifty banks responded to the same set of
questions regarding revolving home equity lines of credit. Forty-seven banks reported no appreciable
changes in credit standards for these loans over the past three months; one
said standards had tightened somewhat and two said they had eased
Demand for home equity loans was
substantially the same for 32 banks, moderately weaker for 15, and
substantially weaker for one. Two banks
said that demand had strengthened moderately.
Domestic banks continued to report little change in their standards on
commercial real estate (CRE) loans, which were widely described in a special
question in the previous survey as being at or near their tightest levels since
2005. Forty or 78 percent of all banks
reported little change. However, a large
fraction of foreign respondents reported having tightened standards on CRE
loans, in a substantial shift from the net easing reported by those
institutions in the prior two surveys. Thirteen banks or 25 percent
reported moderately greater demand for CRE loans, 32 reported no change and
four reported moderately weaker and two substantially weaker demand.
The Fed always includes a set of special questions in its survey and the
current set, dealing with lending to firms with European exposure may be of interest.
About one-half of the domestic bank respondents, mostly large banks,
indicated that they make loans or extend credit lines to European banks or
their affiliates or subsidiaries, and about two-thirds of the foreign
respondents indicated the same. Among those domestic and foreign respondents
about two-thirds reported having tightened standards on loans to European banks
over the third quarter. Many domestic banks indicated that the tightening was
About three-fifths of the domestic respondents, mostly large banks, and all
foreign respondents indicated that they make loans or extend credit lines to
nonfinancial firms that have operations in the United States and significant
exposures to European economies. Among those domestic and foreign respondents,
a moderate fraction indicated that they had tightened standards on CI
loans to such firms. These loans reportedly constituted a small portion–less
than 5 percent–of outstanding CI loans at a majority of domestic
respondents, and greater exposures were reported only by large banks. Such
loans typically accounted for larger portions of the foreign respondents’
Small net fractions of domestic respondents indicated weaker demand for
credit from European banks (and their affiliates or subsidiaries) and from
nonfinancial firms with significant exposures to European economies.