Loan standards easing off

by Diana Aqra07 Aug 2013

Lending standards may have have eased for prime and nontraditional loans, while demand for subprime loans has grown.

The Federal Reserve Board's July Senior Loan Officer Opinion Survey has revealed that respondents believe obtaining a loan is becoming easier. About 10.4% of senior loan officer respondents said lending standards “eased somewhat” for prime residential mortgage loans over the last three months, according to the report, while about 9.4%, said that nontraditional residential lending standards eased somewhat. The remaining respondents said standards had remained the same, but none felt standards had tightened.

In the subprime category, 25% of respondents said lending standards “tightened considerably”, while 75% said standards were unchanged, and no respondents believed lending standards had eased.

Notably, a large proportion of banks said they experienced stronger demand on prime loans but saw weakness in demand on nontraditional mortgages.

For prime loans, 57% of respondents said there was “moderately stronger” demand, while 33% reported no change. In the nontraditional category, about 19% said there was moderately stronger demand, 66% said demand remained the same, 9.4% said the demand was moderately weaker, and 6.4% said demand was substantially weaker.

Demand for subprime loans appears to have risen, however, according to the respondents. About 25% of the survey's respondents said subprime demand was moderately higher while 75% said demand was unchanged.

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