HELOC Demand Standards, Ease

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5 · 04 · 10

Underwriting standards on lines-of-credit secured by residential properties eased for the first time in two years, but that wasn’t enough to prompt more borrowing. Demand for commercial mortgages fell to the lowest point since financial markets went into a global tailspin.

Overall loan demand generally weakened further during the first quarter, according to the April 2010 Senior Loan Officer Opinion Survey on Bank Lending Practices from the Federal Reserve.

At the same time, most banks kept their lending standards unchanged compared to the prior survey. Large banks accounted for most of the respondents that reported having eased some lending policies.

Residential lending standards were mostly unchanged, according to the report — which reflected responses from 56 domestic banks and 23 U.S. branches and agencies of foreign banks. It was the same for standards on prime and nontraditional mortgages.

But large banks generally eased standards for prime residential loans.

A bigger share of banks reported lower demand for residential loans compared to the January survey.

Home-equity line-of-credit standards eased for the first time since January 2008 — when the HELOC question was first added to the survey.

However, lower HELOC demand was reported by “a fairly large net fraction of banks.”

The share of institutions that reported weaker commercial real estate lending demand moved below 10 percent for the first time since the financial crisis began. The proportion of banks that tightened commercial mortgage lending standards in the April survey was lower than in the prior survey.

Mortgage Expert

Mortgage Daily Staff