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November 11th, 2009

Loan Survey: Lending Standards Remain Tight

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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.”

Credit Lines

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?

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About the HSH Blog

HSH.com's daily blog focuses on the latest developments in the mortgage and housing markets. Our mission is to relate how changes in mortgage rates and housing policy, as well as the latest financial news, impacts consumers, homebuyers and industry insiders alike. Our 30-plus years of experience in the mortgage industry gives us an edge as we break down the latest changes in an ever-changing market.

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Tim Manni

Tim Manni is the Managing Editor of HSH.com and the author of their daily blog, which concentrates on the latest developments in the mortgage and housing markets.

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