Monday, November 07, 2016

Fed Survey: "Banks reported stronger demand for most categories of RRE home-purchase loans"

by Bill McBride on 11/07/2016 02:08:00 PM

From the Federal Reserve: The October 2016 Senior Loan Officer Opinion Survey on Bank Lending Practices

Regarding loans to businesses, the October survey results indicated that, on balance, banks left their standards on commercial and industrial (C&I) loans basically unchanged while tightening standards on commercial real estate (CRE) loans over the third quarter of 2016. Regarding the demand for C&I loans, a modest net fraction of domestic banks reported weaker demand from large and middle-market firms, while demand from small firms was little changed, on balance. Regarding the demand for CRE loans, a moderate net fraction of banks reported stronger demand for construction and land development loans, while demand for loans secured by multifamily residential and nonfarm nonresidential properties remained basically unchanged on net.
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Regarding loans to households, moderate net fractions of banks reported easing standards on loans eligible for purchase by government-sponsored enterprises (known as GSE-eligible mortgage loans), and modest net fractions of banks reported easing standards on loans categorized as QM jumbo and QM non-jumbo, non-GSE-eligible residential mortgages. The remaining categories of home-purchase loans were little changed on net. Banks also reported that demand for most types of home-purchase loans strengthened over the third quarter on net. Regarding consumer loans, on balance, banks indicated that changes in standards on consumer loans remained basically unchanged, while demand for auto and credit card loans rose.
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On net, domestic survey respondents generally indicated that their lending standards for CRE loans of all types tightened during the third quarter.6 In particular, a moderate net fraction of banks reported tightening standards for loans secured by nonfarm nonresidential properties, whereas significant net fractions of banks reported tightening standards for construction and land development loans and loans secured by multifamily residential properties.

Regarding the demand for CRE loans, a moderate net fraction of banks reported stronger demand for construction and land development loans, while demand for loans secured by multifamily residential and nonfarm nonresidential properties remained basically unchanged on net.
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During the third quarter, a moderate net fraction of banks reported having eased standards on GSE-eligible loans, while modest net fractions reported easing standards on mortgage loans categorized as QM non-jumbo, non-GSE-eligible residential and QM jumbo residential mortgages. Meanwhile, banks left their lending standards basically unchanged for all other categories of residential real estate (RRE) home-purchase loans on net.

Over the third quarter, banks reported stronger demand for most categories of RRE home-purchase loans except for government and subprime residential mortgages. In particular, significant net fractions of banks reported stronger demand for GSE-eligible residential mortgages. Moderate net fractions of banks reported stronger demand for QM non-jumbo, non-GSE-eligible, QM jumbo, non-QM jumbo, and non-QM non-jumbo residential mortgages. emphasis added