Loan Survey: Lending Standards Remain Tightby Tim Manni
According to the October 2009 Senior Loan Officer Opinion Survey, lending standards remain tight. The good news, according to the survey, is that tightening standards have eased somewhat from the “peaks reached late last year.”
While we know this general information comes as no big surprise, we believe it’s important to review the current lending conditions to determine if consumer and business lending is headed in the right direction.
Let’s take just a quick look at a few aspects of the latest survey:
Residential Real Estate Lending
Despite the fact about 25% of banks reported that they have tightened lending standards in the third quarter, the number continues to remain less than last July’s peak of 75%. The demand for prime products continued to grow throughout 2009, not surprising since there is no subprime mortgage market.
Impact of Credit Card Reform
As we’ve speculated for months now, the Credit CARD Act of 2009 has forced many banks to “tighten (or have already tightened) many terms on credit card loans for both prime and nonprime borrowers…”
“For prime borrowers, about 50 percent of respondents, on net, expected to increase interest rate spreads, reduce credit limits, and reduce the extent to which loans will be granted to customers who do not meet credit-scoring thresholds.”
As was the case in the second quarter, lines of credit continue to decrease for most types of customer accounts. The decrease was greatest for certain loan categories, including home equity lines of credit and commercial construction.
“The October 2009 Senior Loan Officer Opinion Survey on Bank Lending Practices addressed changes in the supply of and demand for loans to businesses and households over the past three months.”
Have you noticed any improvement in your ability to access credit?