Loans
Lending

Lending Standards Stricter Industry Wide

Aug 18, 2008 - The central bank recently determined that the number of lenders reporting to have tightened their lending standards is at record levels.   New stricter guidelines are in place as many lenders have suffered heavy loan losses which have drained their capital reserves making it more difficult for them to sustain future losses and resulting in market conditions which are extremely challenging to sell mortgages, as well as other types of asset-backed securities, in the secondary market where lenders refresh their supply of capital.  Lenders are having difficulty funding loans in this new climate of scarcer resources for even their best credit customers.  The new tightened lending standards are creating an environment where stingy credit may be slowing the recovery process of the over all economy.  Lenders across the board are facing greater challenges in securing a loan against any asset (primarily real estate) which may be declining in value. 

Loan Officer Loan Application rejected

Almost 75% of banks and lending institutions surveyed admitted to having tightened their lending standards for all prime mortgages they underwrote.  Roughly 30% of lenders within the U.S. indicated they had now underwritten, packaged and sold mortgages reaching the new conforming maximum (of $729,750) to Fannie Mae or Freddie Mac within the previous quarter.  However less than 15% of the lenders surveyed were still underwriting sub-prime mortgages and over 85% of those lenders choosing to remain in the sub-prime market now applied stricter lending guidelines when extending sub-prime loans.   The new loan standards being applied have not been restricted to only first mortgages as tougher conditions exist for both home equity loans as well as credit cards.  Roughly 80% of the banks surveyed indicated they had tightened their lending standards and for those lenders extending credit card debt, the rate nearly doubled in numbers for those claiming to have tighter lending guidelines.  More restrictive guidelines for consumer loans could cut the consumer off at the knees just as the well of home equity may be drying up.  Surprisingly, rates were lower at the time the Fed began their series of rate cutting measures than they actually are today.  It appears a “perfect economic storm” is brewing which includes falling home prices, rising inflation and a job market which appears to be steadily weakening.   Poor performing loans have shifted from just the mortgage category onto a variety of other debt, including credit cards and auto loans.  In today's environment of tightened lending standards, raising capital has become more difficult for lenders who are faced with a wave of bad debt write-downs just as the consumer is searching for new sources of funds to tap into, making the strain on the economy likely to continue into the foreseeable future. 


Nancy Osborne, ERATE.com Nancy Osborne has had experience in the mortgage business for over 20 years and is a founder of both ERATE, where she is currently the COO and Progressive Capital Funding, where she served as President. She has held real estate licenses in several states and has received both the national Certified Mortgage Consultant and Certified Residential Mortgage Specialist designations. Ms. Osborne is also a primary contributing writer and content developer for ERATE.

"I am addicted to Bloomberg TV" says Nancy.

What CARD Act? Credit cards get more expensive

Fed Cuts Rate in Efforts to Ease Credit Crunch, Help Borrowers, 10-08-2008

Fannie Mae & Jumbo Mortgage Rates

Just One Click! = Current Rate Chart

Pennsylvania Mortgage Rates Current Mortgage Rates - Hawaii Current Mortgage Rates - Alaska West Virginia Mortgage Rates Virginia Mortgage Rates District of Columbia Mortgage Rates Maryland Mortgage Rates Delaware Mortgage Rates New Jersey Mortgage Rates Connecticut Mortgage Rates Rhode Island Mortgage Rates Massachusetts Mortgage Rates New Hampshire Mortgage Rates Vermont Mortgage Rates New Hampshire Mortgage Rates Maine Current Mortgage Rates Vermont Mortgage Rates Current Mortgage Rates - New York Current Mortgage Rates - Michigan Current Interest Rates - Wisconsin Current Mortgage Rates - MINNESOTA Ohio Mortgage Rates Current Mortgage Rates - Kentucky Current Mortgage Rates - Indiana Illinois - Current Mortgage Rates Current Mortgage Rates - Iowa Missouri Mortgage Rates Current Mortgage Rates - North Carolina South Carolina Mortgage Rates Current Mortgage Rates - Florida Current Mortgage Rates - Georgia Current Mortgage Rates - Tennessee Current Mortgage Rates - Alabama Current Mortgage Rates - Mississippi Current Mortgage Rates - Louisiana Current Mortgage Rates - Arkansas Current Mortgage Rates - Oklahoma Current Mortgage Rates - TEXAS Current Mortgage Rates - New Mexico Current Mortgage Rates - Arizona Current Mortgage Rates - Kansas Current Mortgage Rates - Nebraska Current Mortgage Rates - Colorado Current Mortgage Rates - Wyoming South Dakota Mortgage Rates Current Mortgage Rates - North Dakota Current Rates - Montana Idaho Current Rates Washington Mortgage Rates Current Mortgage Rates - Oregon Current Mortgage Rates - Utah Current Mortgage Rates - Nevada Current Mortgage Rates - California

Start by selecting your state





Get the Updated and Improved Mortgage Rates App from ERATE.com

iPad for Mortgage Rates

Refinancing: Getting Started

Refinancing Info and Advice

Refinancing: Selecting a Loan


FREE Mortgage Rate Widgets
Your State's Rates or National Rates
Get this Widget for any State you want