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Fed survey shows some banks are making it easier to get a mortgage

Credit standards are relaxing, ever so slightly

Results from a new survey released Monday by the Federal Reserve show that a few banks are making it easier to get a mortgage, but nearly all banks are still not venturing into subprime or other risky mortgages.

According to the Fed’s October 2015 Senior Loan Officer Opinion Survey on Bank Lending Practices, which is based on the responses from 69 domestic banks and 23 U.S. branches and agencies of foreign banks, banks reported having eased lending standards on loans eligible for purchase by the government-sponsored enterprises and on qualified mortgage loans over the past three months.

When asked how have your bank's credit standards for approving mortgage applications changed over the last three months, 86.2% of the respondents said that their bank’s lending standards for Fannie Mae and Freddie Mac-eligible mortgages remain “basically unchanged.”

But 12.1% of the respondents said that their lending standards for GSE-eligible mortgages had “eased somewhat,” while 1.7% of the respondents said that their lending standards had “eased considerably.”

On the other hand, when asked about lending standards for “government loans,” which include loans that are insured by the Federal Housing Administration, 13% of lenders said their lending standards have actually “tightened somewhat” in the last three months.

The vast majority of the lenders surveyed said their lending standards for government mortgages remain “basically unchanged” over the last three months, while 5.6% said their standards have “eased somewhat” and 1.9% said their standards have “eased considerably.”

Unsurprisingly, nearly all of the surveyed lenders said they are still not originating subprime mortgages. In fact, 57 of the respondents said they were not doing subprime mortgages, while only five respondents said were lending to subprime borrowers.

Of those five lenders who are doing subprime mortgages, one said that their subprime lending standards had “tightened somewhat,” while the other four said their subprime lending standards were unchanged.

Interestingly, nearly a quarter of the lenders said that the demand for Fannie or Freddie-eligible mortgages was “moderately weaker” in the last three months.

Conversely, 15.5% of lenders said that demand for GSE mortgages was “moderately stronger” in the last three months, while 60.3% said that demand was basically the same as the previous time period.

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