Banks are tightening lending standards
Mortgages, The Economy, Real Estate May 11th, 2008
This is good news. Too bad it took a credit meltdown for banks to realize that were giving money to anybody with a pulse. According to the Sun Sentinel:
Lending standards near all-time highs
WASHINGTON - The Federal Reserve reported Monday that more banks are tightening lending standards on home mortgages, other types of consumer loans and business loans in response to a spreading credit crisis.
The Fed said the percentage of banks reporting tighter lending standards was near historic highs for nearly all loan categories.
The survey, conducted in April, found that nearly two-thirds of banks surveyed had tightened lending standards on traditional home mortgages with 15 percent saying those standards had been tightened considerably.
But the survey found that the tougher lending standards extend far beyond home mortgages to other types of consumer debt such as credit cards and home equity lines of credit.
Analysts said the tightening up on credit-card borrowing was coming at a particularly bad time given that slumping home prices have made it difficult for borrowers to tap their home equity lines of credit as a source of cash and many consumers have turned instead to using their credit cards.
The latest Fed survey found that banks tightened their lending standards on not just prime or traditional mortgages but also on nontraditional mortgages such as “Alt-A” loans given to people who supplied only limited income verification. The survey found that about 32 percent of the banks responding to the survey had tightened “considerably” their standards for nontraditional mortgages and another 43 percent had tightened standards in this category “somewhat.”
The survey found that only nine banks are currently making loans in the subprime category and of that group, 78 percent had tightened lending standards either considerably or somewhat.
