Banks that make commercial real estate loans are reporting that credit standards have recently tightened. Meanwhile, demand for residential loans has risen across the board.
For home-purchase loans eligible for acquisition by Fannie Mae and Freddie Mac, 15 percent of large banks noted credit standards eased in the three most-recent three months.
At the same time, stronger demand on government-sponsored enterprise mortgages was indicated by exactly half of all banks compared to the previous three-month period.
The Federal Reserve Board delivered those findings and more in its
July 2016 Senior Loan Officer Opinion Survey on Bank Lending Practices.
A total of 71 domestic banks and 23
U.S. branches and agencies of foreign banks participated in the survey, which was due by July 12.
Large banks are defined as those with domestic assets of at least $20 billion. The 42 participating large banks held $9.6 trillion of the total $9.9 trillion in assets of all 71 domestic banks.
For the residential portion of the survey, questions related to purchase financing.
On government mortgages, there has been hardly any change in credit standards recently. More than 40 percent of banks, though, indicated stronger demand for such loans.
The report
indicated that there has been little change in credit standards for QM non-jumbo non-GSE loans; QM jumbo loans; non-QM jumbo mortgages; and non-QM non-jumbo loans.
Demand for QM non-jumbo, non-GSE mortgages was up at nearly a third of all banks,
while it was stronger at 42 of banks that the make QM jumbo loans, and 28 percent of banks that make non-QM jumbo mortgages. Less than a fifth of banks that make non-QM non-jumbo noted stronger demand for those products.
Credit standards at banks that originate home-equity lines of credit were slightly looser at 11 percent of large banks.
At the same time, HELOC demand rose at over a third of all banks.
When asked about current HELOC standards relative to the period between 2005 and now, almost half of larger banks indicated they are tighter than the midpoint of the range.
Among the five banks that make subprime mortgages, one smaller financial institution noted considerable tightening in subprime credit standards.
Similarly, just one smaller institution indicated stronger demand, though a large bank noted weaker demand.
On subprime standards between 2005 and now, 62 percent of banks indicated that credit standards are tighter than the midpoint of the range — with 23 percent indicating “significantly tighter” and nearly a third reporting that subprime credit standards are “near the tightest level that standards have been during this period.”
Commercial Real Estate Lending
A fifth of banks said credit conditions were tougher for loans
secured by nonfarm nonresidential properties, with the share climbing to nearly a quarter at large banks.
Demand for CRE loans was up at 18 percent of banks.
On multifamily loans, almost half of banks said that credit standards had become more restrictive, with 59 percent of large banks saying this.
More than a third of smaller banks said demand had increased for multifamily loans, while a fifth of large banks reported the opposite.
Over a third of banks noted tightening in construction-and-land-development loans, with 46 percent of large banks indicating tightening in this category.
The tightening in C&D lending came even as demand was up at nearly 30 percent of banks and 41 percent of smaller banks.
