Federal Reserve Credit Survey Results – Not Pretty

Doug Marshall
Market Assessment
Published May 21, 2008

In a survey taken quarterly by the Federal Reserve, some hard numbers get put to the trends seen in banks and their credit requirements for real estate funding.

A net tightening/loosening figure was placed on each sector and their lenders, reflecting an net tightening of credit by banks looking at loan requests, across markets.

The survey, titled “Senior Loan Officer Opinion Survey on Bank Lending Practices” for the second quarter of 2008, found that:

► A net 55.4% of lenders have tightened their standards on commercial and industrial loans to mid- and large-sized customers. At this time last year, banks were easing these requirements.
► On commercial real estate, a net 78.6% of lenders also tightened their standards. The first quarter of 2008 had the highest net increase in history; the second quarter, on which this number is based, comes in right behind.
► Residential mortgage numbers are even worse: 77.5% of lenders have tightened their standards in the sub-prime market. And even in the prime mortgage markets, 62.3% of lenders have tightened up. This is the highest increase, by a long shot, that the Fed has ever found in this sector.

The story told by these numbers is that lenders, who have been generous but not terribly discriminating in the past few years, are getting stingy with consumer, corporate, and commercial real estate funding. And in the consumer credit arena, even though demand has improved, supply just isn’t there.

Source:
Mike Larson, www.moneyandmarkets.com, May 9, 2008