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Lenders don't expect credit requirements to loosen

February 3, 2011 - Tighter lending standards have forced many consumers around the country to postpone their moving plans, and a new report from the Federal Reserve suggests the climate won't get any better.

In a survey of senior loan officers at 54 lenders around the country, the Fed revealed only one lender said their credit standards had eased somewhat over the past three months. Fifty-one respondents - 94.4 percent - said their credit qualifications were as strict as ever, while two actually said their standards had grown more severe. The report also showed demand for mortgages from consumers hiring movers has remained relatively steady over the past three months, with only four banks saying they've seen demand increase and more than 40 percent saying it's grown weaker.

Despite the tight credit climate, lenders appear to believe borrowers are ready to re-enter the market and secure financing for their relocation to a new home. About 50 percent think their mortgage holdings will increase over the first half of 2011. Additionally, more than 46 percent think the quality of the loans they underwrite will improve in 2011.

Poor-quality loans were widely considered to be a large reason why the housing market took a turn for the worse in 2007 and 2008. Several major lenders began downsizing or eliminating their subprime mortgage branches, which were loans often tied to the market crash.
 

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