Federal Reserve: Banks to increase real estate loan exposure
Borrower demand for prime residential mortgages is strengthening, causing some banks to anticipate increasing their exposure to such loans over the next year.
The Federal Reserve Board’s April survey of senior loan officers showed standards on prime residential mortgage loans and home equity lines of credit in the month were roughly unchanged. It also indicated a moderate strengthening in demand for prime residential mortgage loans, the board said.
The survey, released on Monday, includes two sets of special questions. The first set asked banks about lending to firms with European exposures, and the second set asked banks about their residential real estate lending policies.
In response to the second set of questions, banks reported that they were less likely than in 2006 to originate mortgages to any borrowers apart from those with the strongest credit profiles.
A moderate net fraction of banks reported anticipating increasing their exposure to residential real estate assets over the next year.
“However, several large banks indicated that they anticipated reducing their exposures somewhat or substantially, and banks of all sizes cited a variety of factors that were limiting their current ability to originate or purchase residential real estate loans,” the board said. “A moderate share of banks reported that they were actively soliciting applications for the revised Home Affordable Refinance Program, or HARP 2.0.”
In response to the first set of questions, banks reported tightening standards on loans to European banks and on loans to nonfinancial firms with substantial business in Europe. Domestic respondents reported increased demand owing to reduced competition from European banks.
The survey addresses changes in the supply of, and demand for, bank loans to businesses and households over the past three months. This summary is based on responses from 58 domestic banks and 23 U.S. branches and agencies of foreign banks.
Check out the charts below for senior loan officers' answers to the following question: Indicate how much more or less likely it is, compared with 2006, that your bank would originate a GSE-eligible, 30-year, fixed-rate mortgage loan intended for home purchase to borrowers with a 620 FICO score and 10% down payment.
Borrower with a 720 FICO score and 20% down payment: