Banks indicated they had tightened their lending standards on each of three mortgage loan categories over the past three months: prime, nontraditional, and subprime residential mortgages, according to the July 2007 Senior Loan Officer Opinion Survey on Bank Lending Practices, whose results were released last week by the Federal Reserve Board.
About 14% of domestic banks tightened their lending standards on prime residential mortgages over the past three months. Of 42 institutions that reported having originated nontraditional residential mortgages, 40% said they had tightened standards on these mortgage products. Of 16 institutions that reported having originated subprime residential mortgages, 56% said they had tightened standards on such loans.
As in the April survey, tighter standards on subprime and nontraditional residential mortgage loans were not necessarily associated with more stringent lending policies on prime residential mortgage loans.
Only two of the nine institutions that reported having tightened standards on subprime mortgages over the past three months also indicated that they had tightened standards on prime mortgages, and six of 17 institutions that tightened standards on nontraditional mortgage loans said they also had tightened standards on prime mortgages.
Regarding demand for residential mortgages, 10% of respondents reported weaker demand for prime residential mortgage loans, and 20% of respondents experienced weaker demand for nontraditional residential mortgage loans. About 44% of respondents, more than twice the net percentage reported in the April survey, reported weaker demand for subprime residential mortgages over the past three months.
On balance, domestic respondentsí willingness to make consumer installment loans and their lending standards for approving applications on credit card loans were little changed over the past three months. About one-eighth of the respondents reported having raised spreads of interest rates charged on outstanding credit card balances relative to their cost of funds