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Monday, February 04, 2008

Fed: Lenders Tightening Standards, Loan Demand Falls

by Calculated Risk on 2/04/2008 02:34:00 PM

From the Fed: The January 2008 Senior Loan Officer Opinion Survey on Bank Lending Practices

In the January survey, one-third of domestic institutions—a larger net fraction than in the October survey—reported having tightened their lending standards on C&I loans to small as well as to large and middle-market firms over the past three months. Significant net fractions of respondents also noted that they had tightened price terms on C&I loans to all types of firms, including raising the cost of credit lines and the premiums charged on riskier loans over the survey period.
About 80 percent of domestic banks reported tightening their lending standards on commercial real estate loans over the past three months, a notable increase from the October survey. The net fraction of domestic banks reporting tighter lending standards on these loans was the highest since this question was introduced in 1990.
In the January survey, significant numbers of domestic respondents reported that they had tightened their lending standards on prime, nontraditional, and subprime residential mortgages over the past three months; the remaining respondents noted that their lending standards had remained basically unchanged.
CRE Loan Demand vs. Non-residential Investment StructuresClick on graph for larger image.

Of particular interest is the record increase in tighter lending standards for Commercial Real Estate (CRE) loans. This graph compares investment in non-residential structure with the Fed's loan survey results for lending standards (inverted) and CRE loan demand.

This is strong evidence of an imminent slump in CRE investment.

More charts here for residential mortgage, consumer loans and C&I.