FED Survey Says....Credit Is Tougher To Get.

The Federal Reserve reported the credit squeeze only got worse during the past 3 months and that most banks plan to stay very conservative for at least another year!
So even after all of the massive cutbacks and changes that our industry as undergone over the past 2 years, either more changes seem to be on the way or at the very least we will continue with the current environment. This doesn't really come as a surprise, but nevertheless these are the results the survey produced.

58% of Banks tightened lending standards for commercial and industrial loans to large and medium firms. 65% tightened lending standards for small firms.

81% of Banks tightened standards on commercial real estate, while 50% of banks said demand for these products was weakening.

74% of banks said they tightened lending standards for prime mortgages. At the same time 53% said they saw reduced demand.

86% of banks tightened lending standards for subprime mortgages. The total number of banks who offer such loans declined to 14% of all banks from 30% two years ago.

84% tightened lending standards on non traditional mortgages while 63% reported reduced demand in these products.

36% of banks were less willing to extend credit in the form of consumer installment loans.
Only 2% were more willing.

80% tightened lending standards on home-equity lines of credit.

67% tightened lending standards on credit cards. This was done mostly by refusing new loans to consumers without good credit.

When they refer to tighter lending standards they are refrring to the following:
Higher credit score requirements, more documentation is required, more collateral is required, and higher interest rate spreads are offered. It is also becoming more common for banks to ask for co-signers.

So from these results we can see that the credit crunch is still very much upon us. Tighter credit standards will hurt the economy and slow spending. There are less avenues for people to consolidate debt and they will lean more heavily on credit cards. I really think it is only a matter of time before these credit cards companies get pinched hard. It just makes sense for this to happen. Just look at one piece of the puzzle that makes up credit card consumers, the foreclosure market. All of these people who are foreclosing on their homes no doubt have credit cards. They probably have been relying on them heavily in the recent months trying to make thing work. When they finally run out of options and are forced to walk from their homes they surely leave credit card companies hanging too. Bankruptcy is the common alternative at this point for most people. If this pinch takes place I just hope it isn't as severe as the mortgage meltdown! That would be a mess!

While this information isn't very positive, I thought the survey results were very interesting to see and wanted to pass it along.

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Professional Mortgage Group, Inc.
"Your Columbia, MO Mortgage Broker"