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Bank Lending Trends

Bank Lending TrendsSenior Loan Officer survey released by fed

May 4, 2009

By staff

As U.S. bankers continue to tighten their residential lending, demand for prime mortgages is rising and some signs of life are emerging in commercial mortgage lending. But most bankers expect further deterioration in their portfolios.Residential lending guidelines for prime borrowers were tightened by nearly half of the 49 banks that originated prime mortgages in the April 2009 Senior Loan Officer Opinion Survey on Bank Lending Practices released today by the Federal Reserve. Demand for prime mortgages increased at slightly more than half of the respondents.

The survey was based on responses from 53 domestic banks and 23 U.S. branches of foreign banks.

Of the 25 banks that originated non-traditional loans, nearly two-thirds pulled back on their guidelines. Nontraditional mortgage demand was unchanged at the majority of banks, though 28 percent saw demand drop.

Just two of the banks surveyed made subprime loans.

The share of banks that restricted the home-equity line-of-credit guidelines fell to 50 percent from 60 percent in the prior survey. Half of banks saw HELOC demand decline.

Nearly two-thirds of the banks said they had tightened commercial mortgage standards, easing from 80 percent in the prior survey.

“On balance, domestic banks have been tightening credit standards on commercial real estate loans for 14 consecutive surveys, and the April survey marks the first time since October 2007 that the net proportion of banks reporting such tightening fell below 70 percent,” the report said.

More than 70 percent of banks indicated that they expect their portfolios to deteriorate this year, while more than 90 percent forecast deterioration in their commercial mortgage and nontraditional mortgage portfolios.

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