|Fed Survey Shows Tightening Bank Lending Standards
Lending standards and terms for a broad range of loan types tightened during the fourth quarter of 2007 at both domestic and foreign banks, according to the most recent Senior Loan Officer Opinion Survey on Bank Lending Practices conducted by the Federal Reserve Board. During the survey period, the demand for bank loans from both businesses and households weakened.
Tighter standards, weaker demand for all loan types
For residential mortgage loans, a majority of banks tightened their lending standards and reported weaker demand for all types of mortgages but especially nontraditional and subprime loans.
Most domestic banks also tightened their standards for approving applications for revolving home equity lines of credit, and many said that demand for such credit had weakened.
Some banks also tightened lending standards for credit card loans and other types of consumer loans while also reporting weaker demand.
As reasons for more restrictive lending policies, institutions pointed to a less favorable or more uncertain economic outlook; a reduced tolerance for risk; a worsening of conditions for particular industries or in particular markets; and, in some cases, a deterioration of current or expected capital or liquidity positions.
Mitigating losses on residential mortgage loans
February 27, 2008