US Fed Survey: Subprime Lenders Tightening Standards; Prime Lending Business As Usual

In its periodic Senior Loan Officer Opinion Survey on Bank Lending Practices released Monday, the Fed found that while bankers have become more stringent when dealing with subprime and nontraditional mortgages, policy toward standard loans remains largely unchanged. 56% of the banks responding reported tightening standards on subprime loans, and 46% did the same on nontraditional mortgages (such as interest-only loans and loans with minimal income verification), while only 15% said they changed requirements for prime residential mortgages (see graphic; click to enlarge). About one-third said they had tightened lending standards on commercial real estate. 36% said loan demand for all loans was softer while 52% said it was unchanged. 10% said business loan requests dropped, hinting to a possible pullback in business spending. The Mortgage Bankers Association expects home-purchase loan activity to fall 7% this year and refinancing activity to drop 10%.

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