Banks Report Unchanged Home Lending Standards

2022-08-03T12:17:07-05:00

By Litic Murali on August 3, 2022 • In the second quarter iteration of the Federal Reserve Board’s Senior Loan Officer Opinion Survey (SLOOS) on Bank Lending Practices, banks reported largely unchanged lending standards across all residential real estate (RRE) loans. Major net shares of banks reported weaker demand for most RRE loans except for home equity lines of credit, for which a significant net share of banks reported stronger demand. The second quarter also saw tighter credit standards for Commercial Real Estate (CRE) loans and Commercial and Industrial (C&I) loans. The below figure derived from the SLOOS shows that RRE credit standards relative to the first quarter of 2022, tightened by no more than 5.6 percent, except for subprime mortgages for which banks tightened standards by 12.5 percent. Government-issued mortgages, such as FHA and VA loans, were the only category of RRE loans that showed a loosening of credit standards, that too, by a negligible amount of -1.9 percent. Although major net shares of most banks reported weaker demand for RRE loans, a small fraction of banks reported moderately to substantially stronger demand across all loan categories except subprime residential mortgages. For loans extended to homeowners based on their homes’ market values, a positive net share of 41.1 percent of banks surveyed reported moderately stronger demand for home equity lines of credit and 5.4 percent of banks reported substantially stronger demand. Meanwhile, banks reported tighter lending standards for all Commercial Real Estate (CRE) loan categories and weaker demand in construction and land development loans and nonfarm nonresidential loans. A modest net share of banks, 6.1 percent, reported stronger demand for loans secured by multifamily residential properties. In Q1 2022, multifamily loans’ demand, on net, was 18.5 percent stronger. In the following quarter’s survey, 4.5 percent of banks reported substantially stronger demand, 18.2 percent indicated moderately stronger, and 60.6 percent of banks reported unchanged demand. The questions were subdivided between large commercial banks and other commercial banks.In SLOOS’s last category, Commercial and Industrial (C&I) loans, banks reported a tightening of lending standards across all firm sizes, citing unfavorable economic conditions for the tightening. Thirty-three percent of banks reported moderately stronger demand for C&I loans made to large and middle-market firms while 29 percent of banks reported moderately stronger demand for loans made to small firms. Interestingly, the survey asks banks to use only funds disbursed to measure C&I loan demand. Related ‹ More Prospective Buyers Are Actively Searching for a HomeTags: federal reserve board, Senior Loan Officer Opinion Survey, sloos

Banks Report Unchanged Home Lending Standards2022-08-03T12:17:07-05:00

Banks Report Weaker Demand for Home Loans

2022-05-10T13:19:00-05:00

In the first quarter of 2022, the Federal Reserve Board’s Senior Loan Officer Opinion Survey (SLOOS) on Bank Lending Practices showed a significant net share of banks reporting more relaxed lending standards and weaker demand for most categories of residential real estate (RRE) loans. “Significant” net shares of banks reported weaker demand for all RRE loan categories other than subprime residential mortgages, for which only a “moderate” share on net reported weaker demand. Meanwhile, lending standards and demand for all Commercial Real Estate (CRE) loan categories, except for multifamily loans, remained unchanged. For loans secured by multifamily residential properties, banks reported eased lending standards and reported stronger demand. In Q1 2022, multifamily loans’ demand, on net, was 18.5 percent stronger. In the survey, 26.6 percent of banks reported moderately stronger demand and 66.2 percent of banks reported unchanged demand. The questions were subdivided between large commercial banks and other commercial banks. Banks’ lending standards for loans secured by nonfarm nonresidential properties remained unchanged from the prior quarter and demand for such loans also were unchanged. Residential real estate loan demand was weakest for qualified mortgage (QM) jumbo loans, with 51.9 percent of banks reporting weaker demand. 17.6 percent of banks reported stronger demand for revolving home equity lines of credit, exceeding the shares of banks’ reporting stronger demand in the the other RRE categories. Banks’ lending standards eased most visibly for QM jumbo and non-QM jumbo loans, the segment that is pricing out many first-time homebuyers. Through the first quarter, moderate and modest net shares of banks eased standards for credit card and auto loans, respectively, while banks reported having left lending standards unchanged for other consumer loans. Auto and credit card loans are components of nonrevolving and revolving debt, respectively, as covered in the Federal Reserve’s G.19 Consumer Credit report. This iteration of the SLOOS contained a specialized set of questions about changes in lending policies and demand for CRE loans over the past year. One question, which asked about banks’ lending coverage, found 16.9 percent of banks reporting expanded market areas served for loans secured by multifamily residential properties, 80 percent reporting unchanged standards, and 3.1 percent reporting somewhat reduced market areas. Related ‹ Annual Permits Per Capita: 2001-2021Tags: bank lending, commercial real estate loans, Federal Reserve, HELOCs, home equity lines of credit, multifamily lending, residential real estate, Senior Loan Officer Opinion Survey, sloos, subprime

Banks Report Weaker Demand for Home Loans2022-05-10T13:19:00-05:00

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