Bank Lending Tightens Further According to Fed Survey

The quarterly survey of senior loan officers conducted by the Federal Reserve has been released with a common theme of tightening standards by US banks. The survey revealed that:

62% of banks tightened standards on prime mortgages

49% of banks reduced demand for mortgages

78% of banks tighted standards on subprime mortgages of the 17% of banks that still offer the below credit-grade loans

60% of banks tightened standards on new home equity loans

48% of banks tightened standards on existing home equity lines of which 96% responded was due to equity falling below collateral requirements

The last result may be the most significant because if house prices continue to fall then more and more American consumers are going to fall below the collateral requirements on their home equity loans and be penalized with significantly higher rates. An effect that carries over into consumer spending and the general US economy.

Read the complete April 2008 Senior Loan Officer Opinion Survey on Bank Lending Practices.