Lending Standards Ease Slightly

Written by: Steve Cook   Tue, January 27, 2009 Market Analysis

Slightly fewer banks reported tightening their lending standards for prime mortgages during the third quar­ter of 2008, according to the Federal Reserve’s Senior Loan Officer Survey on Bank Lending Practices.

The number of banks tightening standards decreased from 75 to 70 percent, the first time the survey has shown a net decrease since banks started to crack down on standards for mortgages and consumer debt over a year ago.

Larger banks were much more likely to tighten stan­dards during the quarter than smaller banks. About 80 percent of the largest banks, but only 55 percent of smaller banks reported tighter standards for prime borrowers.

Of the 29 banks in the survey that originated nontradi­tional residential mortgages during the quarter, about 90 percent—up slightly from July—reported having tightened their lending standards on such loans. All four of the banks that responded to the survey’s ques­tion about lending standards on subprime loans indi­cated that they had tightened their lending.




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