A substantial number of consumer lenders are still tightening standards, such as requiring higher credit scores, on prime and nontraditional residential mortgages. An even larger percentage also tightened their standards for commercial real-estate loans and business loans.
“About 45 percent of domestic respondents indicated that they had tightened their lending standards on prime mortgages over the past three months,” the Fed said in its quarterly Senior Loan Officer survey. “Only four U.S. banks (of the 53 included in the survey) reported making subprime mortgage loans over the past three months.”
The number of consumers seeking prime residential mortgages was down about 10 percent. This is a significantly lower fraction than the 50 percent drop that was reported back in October, perhaps a sign that falling demand for loans may be nearing a bottom.
The tighter lending standards include charging higher interest rates, demanding larger down payments, requiring higher credit scores, lowering existing credit lines, and reducing loan maturities.
Today’s report may underscore concern among some U.S. lawmakers and Obama administration officials that banks that have received more than $200 billion of taxpayer funds are failing to lend that on to customers as was expected. Treasury Secretary Timothy Geithner plans to unveil an overhaul of the government’s financial-bailout program next week, an administration aide said.
Almost Half of U.S. Banks Still Tightening Credit Standards