Fed Survey: Mortgage lending standards tightening up
Just look at the Federal Reserve Board's Senior Loan Officer Opinion Survey on Bank Lending Practices. The quarterly survey covers commercial and residential lending -- whether standards are loosening or tightening, whether demand for mortgage, commercial and industrial loans is rising, etc. It covers around 90 domestic banks and U.S.-based divisions of foreign banks.
The net percentage of institutions tightening standards for residential mortgages was NEGATIVE 9.4% in Q2 2006 and -9.3% in Q3 2006. In other words, once you netted out the banks that were tightening standards vs. those that were loosening them, you found that just over 9% were loosening. That was the most widespread easing of standards recorded since late 1993.
But boy have things changed. This Fed indicator has now swung to POSITIVE 16.4%, the highest reading since Q2 1991 (22.9%). Moreover, about half of domestic banks said they expect "a worsening of the quality of their nontraditional residential mortgage loans this year; a few institutions noted that they anticipate that the quality of such loans will deteriorate substantially in 2007."