RSS Feed (xml)
remain tight through the second half of next year, with the exception
of mortgage standards, which already are loosening a bit. The
Fed's latest survey of loan officers found that about 20 per cent of
US banks tightened their lending standards on prime home mortgages
in the April-June quarter, down from around 50 per cent in the
previous quarter and a peak of about 75 per cent a year ago.
Meanwhile, 45 per cent of banks say they tightened standards on
non-traditional mortgages, such as adjustable-rate loans with
multiple payment options, down from 65 per cent in the previous
survey. Around 35 per cent of US banks reported tightening their
lending standards for credit cards, down from nearly 60 per cent in
the first quarter. Getting banks hurt by the financial crisis to
boost lending is critical to a sustained economic recovery. Demand
for prime mortgages has begun to revive, posting its first increase
in the January- March quarter since the Fed began to track those
loans separately in April 2007. The uptick in mortgage demand comes
as rates rose last week. Rates on 30-year home loans remained above 5
per cent, at 5.29 per cent, after reaching a record low earlier this
year. The Fed survey was based on the responses of 55 domestic
banks and 23 US offices of foreign banks. Most of the banks polled
expect their standards for all types of loans to remain tighter than
average levels over the past decade through at least the second half
of 2010. For businesses and families with tarnished credit, that is
expected to continue into 'the foreseeable future' for many banks,
the Fed reported. In other lending, around 45 per cent of banks
surveyed said they tightened standards on commercial real estate
loans over the last three months, down from 65 per cent in the
previous quarter. While banks' losses on home mortgages appear to
be levelling off, delinquencies on commercial real estate loans
remain a hot spot of potential trouble, experts say. Many regional
banks hold large numbers of them. A dramatic example was Colonial
BancGroup Inc, a big lender in real estate development that failed
and was shut down by regulators on Friday — the biggest US bank to
collapse this year with about $25 billion in assets. Montgomery,
Ala.-based Colonial was a major lender to developers in Florida and
Nevada and was hit hard by the collapse of the real estate market in
those states. Its failure is expected to cost the federal insurance
fund around $2.8 billion. The Fed on Monday extended through March
31 the duration of a program intended to spur lending to consumers
and small businesses at lower rates, though it said it had no plans
to expand the types of loans being made. The Term Asset-Backed
Securities Loan Facility figures prominently in the government's
efforts to ease credit, stabilise the financial system and help end
the recession. Under the TALF, investors use the funds to buy
securities backed by auto and student loans, credit cards, business
equipment and loans guaranteed by the Small Business Administration.
Commercial mortgage-backed securities, which were added to TALF in
mid-June, were extended through June 30 because issuing new
securities in that area 'can take a significant amount of time to
arrange,' according to a joint news release from the Fed and the
Treasury Department. Last week, the Fed held interest rates steady
at record lows and again pledged to keep them there for 'an extended
period' to entice businesses and consumers to spend more and nurture
an anticipated recovery.
