While demand for some types of residential lending has strengthened, other products have seen lighter demand. This year’s outlook for residential loan performance is weaker for home-equity products than traditional mortgages. Market conditions on the commercial mortgage side have improved.
In general, there has been little change in lending standards on residential loans over the past three months, while demand has been mixed.
On prime mortgages, lending standards didn’t change much. But demand for prime residential loans has strengthened among domestic banks.
The findings were discussed in the January 2013 Senior Loan Officer Opinion Survey on Bank Lending Practices from the Board of Governors of the Federal Reserve System. The survey included responses from 68 domestic banks and 22 U.S. branches and agencies of foreign banks.
The report indicated that lending standards on non-traditional mortgages hadn’t changed for domestic banks. However, demand in this category was flat.
It was a similar situation for lending standards on home-equity lines of credit: little change.
HELOC demand, meanwhile, was off at a small share of the banks.
Half of the domestic loan officers expect delinquency and charge-off rates to improve in 2013 on prime and non-traditional mortgages. Just a third saw improvement ahead in the quality of HELOCs.
A small share of the loan officers indicated that commercial real estate lending standards eased over the past three months.
Demand for CRE loans was up for a large share of survey respondents.
Among three sets of special questions was a set about changes in CRE lending policies over the past year. Many of the bankers indicated that CRE spreads have narrowed, while several said they eased policies regarding the maximum size and maturity of commercial mortgages.
But debt-service coverage ratios haven’t budged.
Improvement in CRE loans quality this year is expected by 55 percent of the domestic respondents.