Federal Reserve: Mortgage demand increased in 3Q

Almost half of loan officers reported stronger demand for loans backed by Fannie Mae and Freddie Mac

The Federal Reserve’s Senior Loan Officer Opinion Survey showed more demand for consumer credit and mortgages in the third quarter and a softening in demand for business loans.

About 45% of respondents said demand increased for home loans eligible to be purchased by Fannie Mae and Freddie Mac, known as government-sponsored enterprises, or GSEs. About 1.6% reported tighter credit standards for GSE-eligible mortgages, 1.6% reported looser credit standards, and the rest said standards were unchanged.

About 37% reported stronger demand for loans backed by the Federal Housing Administration and the Veterans Administration. About 4.9% said credit standards for those loans had tightened, 3.3% said they had eased, and the rest said they were unchanged.

About 28% of loan officers in the survey said they saw an increase in demand for non-QM home loans that don’t meet the strict underwriting standards for a “qualified mortgage.” About 6.7% said credit standards for those loans had tightened, 3.3% said they had eased, and 90% said they were unchanged.

There was no increase in demand for subprime mortgages given to borrowers with weak credit qualifications, respondents said. Almost 13% said standards for that type of mortgage had tightened, none reported the standards have eased, and the rest said they were unchanged.

While mortgage demand rose, business lending weakened. Almost a third of the senior bank loan officers surveyed said demand for business loans for new factories and equipment investments was moderately weaker in the third quarter for larger companies, meaning those with annual sales of $50 million or more, while about 20% saw lower demand from smaller firms. 

Most respondents said lending standards for business loans were unchanged. 

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