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| Domestic banks have tightened their mortgage guidelines and seen a decline in loan demand.
Those were the findings of the April 2007 Senior Loan Officer Opinion Survey on Bank Lending Practices released by the Federal Reserve today. A total of 73 respondents participated, including 53 domestic banks and 20 foreign banks. Most of the respondents had not tightened prime underwriting guidelines, according to the report. Prime borrowers have “relatively strong, well-documented credit histories, relatively high credit scores and relatively low debt-to-income ratios at the time of origination.” Demand for prime products dipped during the month. But 45 percent of the domestic banks reported having tightened guidelines for nontraditional borrowers, including those with Alt-A documentation, interest-only payments or option-ARMs, the data indicated. Demand for these loans weakened. Meanwhile, nine of the 16 institutions that originate subprime mortgages reportedly tightened those guidelines. Subprime borrowers either have derogatory credit, an incomplete credit history or high debt ratios. Demand for subprime services softened somewhat during the month. More domestic institutions indicated terms on commercial mortgages have been tightened while demand has weakened, the report said. |
