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Fed Survey Shows Continued Easing of Lending Standards

 

August 5 - The Federal Reserve Board has released the results of its July 2014 Senior Loan Officer Opinion Survey on Bank Lending Practices, which addressed changes in the standards and terms on, and demand for, bank loans to businesses and households over the past three months. The Fed received responses from 75 domestic banks and 23 U.S. branches and agencies of foreign banks.

According to survey results, there was continued easing of lending standards and terms for many types of loan categories amid a broad-based pickup in loan demand. Domestic banks generally continued to ease their lending standards and various terms for commercial and industrial (C&I) loans.

In contrast, foreign banks reported little change in standards and in most of the surveyed terms for C&I loans on net. Domestic respondents, meanwhile, also reported having eased standards on most types of commercial real estate (CRE) loans on balance. Although many banks reported having eased standards for prime residential real estate (RRE) loans, respondents generally indicated little change in standards and terms for other types of loans to households. However, a few large banks had eased standards, increased credit limits, and reduced the minimum required credit score for credit card loans. Banks also reported having experienced stronger demand over the past three months, on net, for many more loan categories than on the April survey. 

The survey included a set of special questions on the effects on the approval rates for home-purchase loans of the Ability-to-Repay and Qualified Mortgage Standards under the Truth in Lending Act (the ATR/QM rule), which came into effect early this year. The majority of banks reported that the new rule has had no effect on the approval rate of prime conforming mortgages, in part because those loans qualify for a safe harbor under the exemption for loans that meet the underwriting criteria of the government-sponsored housing enterprises (GSEs). In contrast, about half of the respondents indicated that the ATR/QM rule has reduced approval rates on applications for prime jumbo home-purchase loans and nontraditional mortgages.

Responses to a set of annual questions on the level of standards indicated that lending conditions had eased, on net, over the past year for many loan categories. As was the case in the July 2013 survey, domestic and foreign banks generally reported that standards for most categories of C&I loans were either easier than or near the midpoints of their ranges over the past decade. After reporting that standards had eased on the quarterly surveys over the course of the past year, domestic banks also generally indicated that standards on most types of CRE loans were now easier than or near the midpoints of their ranges. However, despite shifts toward somewhat more accommodative credit policies for most types of loans to households, moderate to large fractions of banks continued to report that the levels of standards for all types of RRE and credit card loans were at least somewhat tighter than the midpoints of their bank's longer-term ranges.

For the full report, go to http://www.federalreserve.gov/boarddocs/snloansurvey/201408/default.htm.



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