I’ve saying it on TV ‘til I’m blue in the face, and now I’ve got the numbers on paper. The Federal Reserve’s January Senior Loan Officer Opinion Survey, finds the following:
- 55 percent of domestic respondents said they had tightened their lending standards on prime mortgages; that’s up from 40 percent in the October survey.
- Of the 39 banks that do nontraditional residential loans (that’s your ARMs and the like), 85 percent reported a tightening of their lending standards over the last 3 months compared with 60 percent in October.
- Five of the seven banks that originated subprime loans noted they had tightened standards, pretty much the same proportion to October.
So what does that say? The credit crunch continues to bleed further into the prime and non-traditional sectors of the mortgage market. For all the talk we do about refinancing loans and helping troubled borrowers and saving the housing market with lower interest rates, the bottom line is that tighter credit is the culprit.
Banks simply aren’t willing to lend to the even slightly less than credit-worthy customers. I hear it from industry insiders and outsiders for that matter. It’s one thing to offer all these bailout plans, to beg people to call their lenders to refi, to lower interest rates in order to lure buyers off the fence. But the bulk of those people everyone’s trying to lure and help and bail out are inevitably being turned away by the very banks and lenders that created this problem in the first place.