Bank lending standards are easing on loans that meet the Qualified Mortgage classification but are not agency-eligible — especially at larger banks. Demand has grown stronger over the past three months for both residential and commercial real estate loans.
Residential Real Estate – Purchase Financing
On home loans that qualify as government-sponsored enterprise loans, credit standards were more relaxed at 11 percent of banks compared to three months earlier. The rest indicated that there has been no change.
But compared to where lending standards stood in 2005, guidelines for GSE mortgages have tightened at 29 percent of banks.
The findings were discussed in the July 2015 Senior Loan Officer Opinion Survey on Bank Lending Practices from the Federal Reserve Board. The report was compiled based on responses from 71 domestic banks and 23 U.S. branches and agencies of foreign banks.
Demand for GSE-eligible mortgages
has grown stronger over the past three months at nearly half of the banks surveyed.
Credit standards on government mortgages have seen no changes, according to most of the banks surveyed — though a third noted that guidelines have tightened compared to 2005.
More than 40 percent of banks noted stronger demand for government mortgages.
The report said that lending guidelines have somewhat eased over the past three months on loans categorized as QM non-jumbo, non-GSE-eligible at 15 percent of banks. The share that indicated eased standards rose to 19 percent at larger banks.
Demand for QM non-jumbo, non-GSE residential loans has increased at 27 percent of banks.
Loans categorized at QM jumbo have seen credit standards loosen at a quarter of banks. The share jumped to 36 percent at larger banks.
QM jumbo demand was up at nearly a third of all banks and nearly 40 percent of large banks.
Non-QM jumbo lending standards have eased at 13 percent of all banks and 17 percent of large banks.
While 22 percent of all banks noted stronger demand for non-QM jumbo mortgages, the share rose to 29 percent for large banks.
On all
jumbo mortgages, 47 percent of banks indicated guidelines have tightened versus conditions in 2005. At just large banks, 59 percent cited tighter standards.
For loans classified as non-QM, non-jumbo, standards remained basically unchanged at most of the banks, though 13 percent of larger banks said they had eased.
Demand for non-QM, non-jumbo loans has risen at 18 percent of all banks and a quarter of large banks.
At the five banks that make subprime mortgages, there was no change in lending standards. Sixty percent of large banks said subprime standards were tighter than in 2005.
Interestingly, demand has increased for subprime loans at 40 percent of banks and half of large banks.
Most of the banks that make home-equity lines of credit said there had been little change in HELOC lending standards compared to three months earlier. Since 2005, HELOC standards were tighter at 42 percent of all banks and more than half of large banks.
HELOC demand, however, had grown stronger at 28 percent of all banks and a third of smaller banks versus three months prior.
Commercial Real Estate
Although 80 percent of the respondents indicated there had been little change in standards on non-farm commercial mortgages, 14 percent noted a slight loosening. Among smaller banks, 17 percent said guidelines had somewhat eased. Compared to 2005, commercial mortgage standards were looser at 37 percent of banks.
Commercial mortgage demand was up a quarter from April, while demand increased at 29 percent of large banks.
Sixteen percent of banks responded that multifamily
loan guidelines had eased, and 13 percent said they tightened. The remaining 71 percent cited no change. But among smaller banks, 17 percent said multifamily standards had tightened, and another 17 percent noted a relaxing of guidelines. Compared to 2005, apartment lending standards have eased at nearly half of all banks.
Demand for multifamily loans was stronger at more than a quarter of all banks and at 37 percent of smaller banks.
A quarter of banks were mostly evenly split over whether standards on construction-and-land-development loans had tightened or eased, while the rest said they remained basically unchanged. But compared to 2005, forty-six percent noted tighter standards.
Demand for C&D loans picked up, according to nearly a quarter of banks. At smaller banks, the share that reported increased demand surged to 37 percent.
