Small Banks Tighten Lending Standards, According To Survey


Small banks tightened their lending standards on prime mortgages in recent months, but large banks have left their standards largely unchanged, the Federal Reserve reports in its latest survey of senior loan officers. The survey is based on responses from 77 banks.

Prime-mortgage lending standards had been easing as of the release of the Fed's July report. Both large and other-sized banks tightened their standards on nontraditional loan products.

‘Continuing a pattern seen since the start of the financial crisis, fewer than half of the respondents reported having made such loans,’ the Fed says in a summary of its survey.

What the Fed calls a ‘modest net fraction of banks’ – a category made up mostly of smaller banks – also tightened their standards for approving home equity lines of credit.

A weakening demand for home mortgages was reported primarily by smaller institutions.

SOURCE: Federal Reserve

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