Lenders Loosening Lending Standards for Some Loans
- Aug 05, 2014
The Federal Reserve said on Monday in its July 2014 Senior Loan Officer Opinion Survey on Bank Lending Practices that such practices are being loosened, but not quite for every kind of loan. Domestic banks are continuing to ease their lending standards and terms for commercial and industrial loans, and most types of commercial real estate loans as well. Foreign banks (doing business in the United States) reported little change in their standards.
A “modest fraction” of domestic respondents to the survey said that they had eased standards on construction and land development loans, and loans secured by nonresidential properties over the past three months. Respondents also explained, however, that standards for loans secured by multifamily residential properties were basically unchanged. For all these types of CRE loans, reports of stronger demand continued to outnumber reports of weaker demand.
Although many banks reported easing standards for prime residential real estate loans, the Fed said, there’s been little change in standards and terms for other types of loans to households. Still, a few large banks had eased standards, increased credit limits and reduced the minimum required credit score for credit card loans. Banks also reported stronger demand, over the past three months, for many more loan categories than they did for the April survey.
Foreclosures drop, but still high in judicial states
Black Knight Financial Services reported on Monday the 5.7 percent of U.S. residential loans are delinquent, while 1.88 percent are in foreclosure. That’s a slight increase for the delinquency rate, up from 5.62 percent in May, but a decrease for the foreclosure rate, which was 1.91 percent last month.
According to the company, the U.S. inventory of loans in foreclosure is disproportionately distributed in states with judicial foreclosure processes. According to Kostya Gradushy, Black Knight’s manager of research and analytics, while foreclosure inventories have been declining nationwide, judicial states’ foreclosure inventories are 3.5 times that of their non-judicial counterparts.
“Nationally, the foreclosure inventory rate has declined for 26 straight months, and is currently at its lowest point since April 2008, but this can obscure the stark difference that remains between judicial and non-judicial states,” Gradushy notes. “Although judicial states account for about 42 percent of all active mortgages, some 70 percent of loans in foreclosure are in these states. Today, the share of loans in foreclosure in judicial states is 3.23 percent—a significant decline from its January 2012 high of 6.6 percent, but still more than four times higher than the pre-crisis ‘norm.’”
Wall Street bounced back from a run of losses on Monday, with the Dow Jones Industrial Average gaining 75.91 points, or 0.46 percent. The S&P 500 was up 0.72 percent and the Nasdaq advanced 0.72 percent.