The Federal Reserve released its July 2016 Senior Loan Officer Opinion Survey on Bank Lending Practices (SLOOS) this week, revealing that banks have tightened credit standards on their commercial and business loan products over the second quarter of 2016.
Bank loans to households, such as mortgage loans were little changed. Government-sponsored enterprises (known as GSE-eligible mortgage loans) saw an easing of credit standards, and subprime mortgages were reported to have more strict standards.
According to the Federal Reserve, banks reported stronger demand for most categories of purchase mortgage loans over the second quarter of 2016. A stronger demand for GSE-eligible, government, QM non-jumbo non-GSE-eligible, QM jumbo residential and non-QM jumbo residential mortgages, and a moderate net fraction of banks reported stronger demand for non-QM non-jumbo residential mortgages.
Credit standards were reportedly little changed for approving applications for revolving home equity lines of credit (HELOCs), and a significant fraction of banks reported that demand for revolving HELOCs had strengthened on net.
Here are some key points from the survey:
* Current standards for all mortgage loans are currently tighter than the midpoints of the ranges observed since 2005.
* Loans for subprime borrowers are also tighter.
* Prime loans to borrowers with great credit are easier
* A modest percentage of banks indicated that the current level of standards on these loans is tighter than the midpoint of the range that has prevailed since 2005.
The survey is based on responses from 71 domestic banks and 23 U.S. branches and agencies of foreign banks.
To read more details from the survey, please click here.